Sustainable Investment Surge in Mexico

Sustainable investments are becoming increasingly prominent in both public and private institutions in Mexico. The recent surge of thematic bonds underscores companies' commitment to communities and the environment, and is directly linked to their market performance, agree experts. 

Between 2020 and 2022, the Mexican government witnessed a remarkable 419% surge in green bond issuing. By August 2023, these investments had reached MX$122.01 billion (US$6.7 billion). Moreover, pension funds managed by Retirement Fund Administrators (AFORE) have shifted their investment criteria to prioritize ESG considerations.

Guillermo Zamarripa, President, Mexican Association of Retirement Funds (AMAFORE), stated that AFOREs’ strategies consist of making workers' savings a leading force in ESG investment criteria. “In addition to delivering good returns, these investments also encourage sustainable, inclusive, and responsible behaviors in companies. This creates a virtuous circle of investments, jobs, and higher-quality companies,” explained Zamarripa. 

The private sector's thematic bond market has also seen remarkable growth in recent years. In this regard, companies that have embraced strong corporate governance practices, reduced carbon emissions, and demonstrated commitment to the local community, are being recognized by investors at national and international levels.

According to the Corporate Reputation Business Monitor (MERCO), the top-rated companies in Mexico for ESG responsibility in 2022 were Bimbo, Grupo Modelo, and Nestlé. Furthermore, in the latest MERCO ranking for 2023, Bimbo and Grupo Modelo claimed the first and second positions for Companies With the Best Reputation in Mexico, as reported by MBN. This suggests that the gradual adoption of environmental and social commitments in major national companies is directly impacting their overall performance. 

According to David Razú, Director General Afore XXI, Banorte, investments that follow ESG criteria offer advantages beyond their social and environmental impact, including better risk management and superior operational performance, thereby generating higher returns. Morningstar, an American financial services company, reports that over a 10-year period, 80% of sustainable investment funds have outperformed traditional funds. Moreover 77% of ESG funds issued in the last decade have persisted, compared to only 46% of traditional funds. 

Between 2016 and August 2023, approximately MX$277.4 billion were channeled through a combined offering of 83 bonds on the Mexican Stock Exchange (BMV). Sustainable bonds take the lead with the highest number of issuances, totaling 31 offers. They are followed by sustainability-linked bonds with 24 issuances. In addition, there have been 19 issuances of green bonds, eight social bonds, and one blue bond, which is dedicated to financing projects related to the preservation and conservation of water, oceans, and marine ecosystems.

BMV emphasized that the sectors with the highest participation in thematic bond financing have been frequent consumer products at 17.06%, followed by financial services at 15.17%, telecommunications at 13.96%, infrastructure at 12.48%, and development banking at 12.45%.

In 2023, several firms entered the thematic bond market. These include the Federal Electricity Commission (CFE), the Special Fund Trust for Agricultural Financing (FEFA), América Móvil, the housing developer IDEI, Fibra Educa, and BBVA. The collected funds will be focused on renewable energy projects, real estate developments with low carbon generation impact, and products tailored to the circular economy in the case of BBVA. 

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