Advancing Sustainable Finance: Progress in Green Bonds

At the Sustainable Finance MX24 meeting, organized by the Mexican Council of Sustainable Finance, Gabriel Yorio, Deputy Minister of Finance and Public Credit (SHCP), highlighted that Mexico is at a crucial moment to adopt a financial system based on sustainability. Participants highlighted progress in green bond issuance but stressed the need to lower financing costs for environmental projects to promote economic growth and sustainability.

Yorio indicated that the current administration has worked to meet sustainability criteria, primarily in the social sphere. He explained that to achieve this, the government implemented two key actions. First, it formalized the mobilization of the procedure to prioritize the climate change agenda, and subsequently established a sustainable taxonomy that prioritizes social criteria with a focus on gender equity. This allowed for the protection of the assets of green bonds sold in recent years, underscored Yorio. 

In January 2024, the SHCP launched its 2024 sustainable financing program with the issuance of a new bond of €2 billion (US$2.2 billion) with a maturity of eight years and a rate of 4.49%, linked to the Sustainable Development Goals, as reported by MBN. This fundraising marked Mexico's return to the sustainable euro market after nearly three years of absence and represents a 75% increase in the amount of sustainable bonds in circulation in this currency, Yorio stated.

Daniel Gracian, Director of Sustainable Finance, Scotiabank, noted that the issuance of green bonds in Mexico has gained popularity and has generated significant investor appetite to participate. According to Gracian, in 2023, 44% of local issuances aligned with ESG criteria. In contrast, in European regions with greater regulation and momentum in this matter, only 17% represented this alignment in 2023, demonstrating the country's appetite to boost such financial tools.

Gracian noted that the bank currently has a fund of CA$350 billion (US$258.2 billion) for climate change projects, a figure that has become a necessity for the banking sector. “Previously, we did not have this kind of discussions with clients, and after global initiatives like the Paris Agreement, many companies are launching projects that have surprised us and made our work easier,” said the executive. Gracian emphasized that the importance of having such projects is that the benefits are long-term. He added that Mexico can be a spearhead for sustainable finance due to its significance in the region and the developments initiated at the government and corporate levels.

Guillermo Zamarripa, President, Mexican Association of Pension Fund Administrators (Amafore), also highlighted the progress made regarding the issuance of thematic bonds. However, he stressed that despite these advancements, the country is still far from achieving its goals. Zamarripa pointed out three major issues regarding energy in Mexico: the discussion surrounding energy transition, the role of PEMEX, and regulatory challenges.

He added that it is important for various economic actors to pursue sustainability, as it can be a pathway for the country’s development and growth. “One of the pathways for the financial system to achieve sustainability is through financing. In this regard, it is essential that the rules for all intermediaries are symmetrical,” Zamarripa said.