Mexico’s Ministry of Finance and Public Credit (SHCP) issued the BONDESG, the first sustainable sovereign bond in pesos that aims to allow the Mexican government to advance in the development of its sustainable debt market.
“The BONDESG is a new low-risk benchmark for future corporate issues, aimed at actions and projects to combat social inequalities and climate change. This new issue consolidates the sustainable finance model of our country, by making available to investors a range of sustainable instruments that include: green instruments in the capital market, quasi-sovereign social and environmental bonds, and now the new BONDESG,” reads SHCP’s press release.
The SHCP also argues that the operation represents a major step forward in the innovation of sustainable financing instruments. One of the main objectives of the bonds is to promote financial inclusion while helping small investors turn into impactful investors. This operation will allow investors to purchase the new bonds in the Cetesdirecto platform in the future.
The Federal Government Development Bond will be aligned with Environmental, Social and Corporate Governance (ESG) criteria. The bond will be valued in pesos with a coupon payment referenced to the benchmark TIIE Funding rate on one business day.
“Mexico inaugurates its sustainable debt market and becomes one of the first countries in the world to issue sustainable government debt instruments referenced to the new risk-free reference rates. This new market will be one of the largest in Latin America,” said SHCP.
The BONDESG initially placed MX$14.5 billion (US$700 million) for two years and MX$5.4 billion (US$260 million) for six years. The bond saw a positive reception, with 35 national investors putting demand at MX$64.6 billion (US$3.16 billion), 3.2 times the amount placed. This allowed the instrument to be presented at a lower cost than the BONDESF.
“The new BONDESG will promote the development of sustainable instruments in Mexico, since companies will be able to use them as a reference to issue their own ESG instruments, denominated in pesos, and access cheaper financing to carry out their sustainable projects,” said SHCP.