Alba Aguilar
General Director
Consejo Consultivo Finanzas Verdes CCFV

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Mexican Banks Take an Important ‘Green’ Step Forward

By Alba Aguilar | Thu, 05/05/2022 - 18:00

With the recent celebration of Earth Day, in the middle of Russia’s invasion of Ukraine and amid a great energy crisis, it is time to rethink climate change impacts in order to accelerate the transition to green investments and climate technologies, along with public policies, private sector strategies and other regulatory efforts on sustainable finance.

Almost every economic sector has voiced CO2 emissions reduction targets for 2030 and 2050, together with ambitious transition plans to reduce the use of fossil fuels. These actions imply reallocation of capital not only for the development of new infrastructure but also for research and innovation. The European Union is now leading new markets and advancing on technologies related to clean hydrogen and batteries, for example. It is also redefining investments and finance instruments as climate solutions.

The loss of biodiversity caused by climate change is considered a financial risk, affecting the value of natural capital, industries, supply chains, and even public health. This challenge, together with other climate impacts, will require solutions in all sectors and spheres, including economic, financial, and traditional business operations.

In response, there has been a rapid growth and interest in international markets for green and sustainable investment opportunities. Internationally, green issuance accounted for just over half a trillion dollars (US$517.4 billion) in 2021, according to Climate Bonds Market Intelligence. The annual figure is the highest since the market’s inception and maintains the trend of 10 consecutive years of green market expansion.

The Mexican financial system is not lagging behind, as it becomes increasingly aware of its position in the construction of a sustainable market infrastructure. The banking sector is working on an ambitious roadmap with a real long-term vision, taking important steps in this sense. With the objective of boosting sustainable finance, transforming institutions from the inside toward a net-zero economy and involving clients and stakeholders, 34 institutions with operations in Mexico, including commercial banks, development banks, and multilateral banks, have signed the “Statement in Favor of the Development of Green and Sustainable Finance.” The signatories own a credit portfolio worth over MX$6.4 billion (US$312 million), which represents more than 85 percent market share. They have established clear commitments to evaluate and strengthen their environmental, social, and governance (ESG) strategy, as well as to promote the transition toward a greener, more sustainable, and inclusive financial system.

This initiative was announced within the framework of the 85th Banking Convention: “Inclusive banking in the digital age and the challenges of climate change.” It was carried out by the Green Finance Advisory Board (CCFV) and the Mexican Bank Association (ABM). The statement represents an important market signal, in which banking institutions recognize the central role they must play in the development of sustainable finance in Mexico.

The signatory institutions agreed that climate change, energy transition, loss of biodiversity, and social challenges represent risks and opportunities that require special attention in the design of financial solutions. Furthermore, they recognize that governance and technological progress are key for upholding competitiveness and financial stability in Mexico.

Among the commitments in the statement, the following stand out:

  • Alignment to the UN’s framework of Principles for Responsible Banking (PRB).
  • Evaluate and strengthen climate, environmental, social and governance strategies.
  • Generate understanding around the management of climate and social risks, as well as in the identification of opportunities, in line with the recommendations of the “Task Force on Climate-Related Financial Disclosures” (TCFD).
  • Strengthen communication between regulators, market supervisors, financial associations, and other stakeholders.

Furthermore, the CEO of HSBC Mexico and CCFV co-president, Jorge Arce, emphasized the importance of collaboration as an essential part of the transition toward a low-carbon economy. He indicated that the actors in the financial system, in addition to working with clients to make change happen, must be allies of institutions and organizations to exchange ideas and better practices that allow financing the transition to a net-zero carbon footprint. “Today, we have taken a big step as a guild and as a society by signing this statement,” Arce stated.

The CCFV celebrates these declarations, reaffirming the commitment of the banking sector to continue promoting sustainable financing in Mexico. The full statement and the signatory banks can be consulted at: https://www.ccfv.mx/finanzas-verdes/documentos

Photo by:   Alba Aguilar