Working Together to Mitigate Climate Change

Q: What is Sacromonte’s history and what issues can it solve for Mexico’s energy industry?

A: Sacromonte was founded 10 years ago. We started as independent professionals offering consulting services, which turned into a general partnership over time. We have already experienced two governmental changes in Mexico and can use this experience to help companies achieve a better synergy and provide them with counseling and professional services. We had the opportunity to work with an office in the United Kingdom and in Kazakhstan, which allowed us to have regular contact with an international network. We also focused on best practices toward the Mexican context and provided better service to international players seeking to do business in Mexico. At this point, the firm decided to specialize in various sectors, including energy. Currently, the firm provides consulting services to large and medium-sized companies that are looking to expand. We cater to the private sector and arrange all the communication procedures with the government, such as permits and open consultation processes concerning national development plans.

All of our consulting services are based on the United Nations’ Sustainable Development Goals (SDGs). We aim for a thorough implementation of these goals and to adapt them to specialized sectors, such as energy. It can be difficult to measure this implementation, especially if a project experiences little outside interaction. We are working on various SDG projects, including an ambitious energy project involving renewable energy. We collaborate with international institutes to introduce innovative solutions to Mexico to combat climate change, which could have disastrous effects here. We hope that these solutions can be adapted in other countries as well.

Q: How does the firm assess the effect of the government’s policy direction on ESG criteria in Mexico?

A: The government has adopted a completely different strategy from previous administrations. Perhaps the government is showing an eagerness to restructure how the energy sector is approached but often, impact is experienced on a global level. It is, therefore, necessary to have a broader awareness of what our actions can cause and look for partnerships to mitigate negative effects, as suggested by SGD 17. Today in Mexico, public policy is focused on boosting hydrocarbons and energy generation through the two state production companies, PEMEX and CFE. Mexico is still trying to implement its standards in relation to the goals set at the 2015 United Nations Climate Change Conference. Other countries might not feel the impact of climate change as much but Mexico certainly will. Better conductivity through oil and gas pipelines and better electrical infrastructure could help achieve these goals. The 2014 Energy Reform established that these networks remain in the hands of the government and it has a big opportunity to enhance the system.

In this regard, Yucatan and Baja California are important, the latter of which is completely isolated from the national grid. The government could increase its efforts to strengthen the grid in these areas.

Today, many companies are moving away from oil resources to become carbon neutral. For Mexico, this is more difficult as oil is a major resource. The government could, therefore, make use of technology to improve its production processes and reduce pollution. If the country’s refineries adapt to such technologies, oil production and refining can be much more sustainable in the long term.

Q: How could Mexico align the implementation of renewables needed to achieve ambitious climate change goals?

A: It is important to continue with the increase in renewable projects we have seen in recent years. That would be the most viable. There is little time left to reach the climate goals set by international agreements. However, in recent years research centers, boosted by international cooperation, have been helping to drive Mexican technology that can accelerate the process, such as biomass and green hydrogen. Utility-scale renewables have come to a halt as a result of the current situation in the sector.

People are looking for ways to keep Mexico on track with renewables. For example, Queretaro’s energy cluster is looking to increase authorization of distributed solar generation for small generators ranging from 0.5MW to 1MW. This would be a major change. From a social perspective, we need to find ways in which to make the transition to cleaner energy a reality. This also includes changing electrical equipment at home and on the streets.

Q: How does the firm assess the adaptation of green bonds in the Mexican market?

A: One favorable circumstance developing within the government is the Fideicomiso called FIRA, which is focused on agricultural development, from small producers to major companies. FIRA has been issuing green bonds, boosting the area during two governmental administrations. They just brought a portal online that is focused on environmental social governance (ESG), which is strongly related to green finance. It focuses on mitigating climate change and related topics. It also focuses on a positive social impact, all measured with quantifiable data and with the goal of being profitable. Since it is public information, we can see how the bonds have developed and can tell what their direct impact will be.

FIRA has specific projects that are well-planned and showcase standardized criteria. FIRA had to develop these to effectively work with international counterparts. These criteria can help improve the impact of green finance on the Mexican market.

The Mexican Banking Association is also shifting its focus toward ESG principles, which also benefits green finance and sustainable projects in general because they all need money. Banks such as Banorte, BBVA, Santander and Citibank have taken the responsibility to take up sustainable projects, which is a great opportunity to build the economy. The participation of financial institutions is crucial for market development. The market would need to adapt to the demands made by banks as well: their checklists are absolutely essential. Green finance and climate impact could become part of a defined strategy with a legal basis. This would influence various sectors in the Mexican economy, ranging from energy to tourism.

Sacromonte Ganuc de Mexico is a Mexican multidisciplinary consulting firm, focusing on fostering collaboration between national and international players to enhance performance and become more sustainable.