Money Matters: Financing the Future of Sustainability in Mexico

The future of sustainability relies heavily on securing financing to implement ESG strategies effectively. While ESG concerns have increasingly become part of the economic agenda, many Mexican companies still lag in adopting these practices. Financial institutions play a pivotal role in helping companies comply with ESG standards, thereby improving their access to financing and maintaining competitiveness. Although challenging, financial institutions can leverage their experience from other markets to support Mexican companies in this transition.

In 2023, the Ministry of Finance and Public Credit (SHCP) launched the Sustainable Finance Mobilization Strategy, a key financial policy aimed at channeling resources toward low-carbon, climate-resilient, and inclusive investments. That same year, Mexico US$14.7 billion in VSS+ bond issuances, based on the Climate Bonds methodology, marking a 25% rise in aligned volume.

The Sustainable Finance Mobilization Strategy is built on three key pillars: Sustainable public financial management, focused on improving the allocation, monitoring, and evaluation of public investments in line with the Sustainable Development Goals (SDGs); mobilizing sustainable finance, centered on creating financial policies and regulatory conditions that integrate ESG (Environmental, Social, and Governance) factors into investment decisions; and cross-cutting actions, which ensures the inclusion of gender perspectives within the financial sector.

Advancing Mexico's sustainability also requires a fresh approach from financial institutions. "It is virtually impossible to implement all necessary sustainable measures solely with public resources. There is a significant opportunity for financial institutions to support this transition," says Enrique Lendo, Director General of Business Development, Energy and Water Development Corp.

Mexico’s leadership in sustainable finance is further reinforced through collaboration with international organizations like the Global Green Growth Institute (GGGI), which has facilitated access to various climate funds and provided technical assistance to ensure the alignment of strategies with national and global sustainability goals. 

“The world has changed, and ESG implementation is not up for debate; it is a matter of execution. There is regulation in place; now, we need to focus on its development,” says Carlos Vargas, Chief Sustainability Officer, Grupo HYCSA. Vargas acknowledges that while the necessary taxonomy exists, companies still face challenges when applying it. However, continuous implementation will streamline these processes, he adds.

In the banking sector, the Mexican Banking Association (ABM) has promoted the Sustainability Banking Protocol. In 2020, it introduced an ESG and Climate Risk Analysis Tool to help financial institutions assess environmental and social risks. Mexico has also made significant progress in issuing green bonds, with increasing local and international demand for these instruments. In January 2024, the SHCP returned to the sustainable euro bond market with a €2 billion (US$2.2 billion)  issuance linked to the Sustainable Development Goals, marking a 75% increase in the circulation of sustainable bonds in euros.

David Razú Aznar, General Director, Afore XXI Banorte, highlights the challenge of financing sustainable development, drawing on the concept of the "tragedy of the commons," where collective benefits do not clearly advantage any single entity. Razú explains that assessing this type of financing involves several stages. First, risk management is conducted using a detailed matrix with 40 indicators and various scenarios. Specific evaluations are then carried out to understand the ESG environment, supported by international agencies. Finally, ongoing engagement ensures continuous involvement and support.

Razú stresses that Mexico still lags in responsible investment. He notes that expecting Mexican issuers to have in-depth ESG knowledge is unrealistic at this stage. Therefore, the focus should be on supporting them rather than denying access to financing due to gaps in knowledge, which could hinder progress and inadvertently favor international companies.

Experts agree that data sharing among stakeholders is essential for improving ESG financing assessments. “We need to sit down and align our goals, with a greater focus on governance. This involves defining portfolios based on frameworks and regulatory guidelines, as well as offering products tailored to each sector. What we offer is an independent portfolio that ensures transparency and integrity throughout the process,” says Aidee Olmos, Head of Corporate Sustainability Mex & LAM, HSBC.