Following its commitment towards mitigating climate change, Mexico adopted the Green bonds practice, promoted throughout climate change related summits like the COP 21 held in 2015, the Paris Agreement and Hangzhou’s G20 summit, both in 2016.
Green bonds are used to finance investments directed towards environmentally-friendly projects. The sectors eligible for these bonds pertain to renewable energy, energy efficiency, clean transportation, water management, recycling, agriculture and telecom technologies. They can be used either by government agencies or private companies, provided they have the qualifying credit record to do so. Also, the bond will be monitored and reported on as the resources are allocated to the approved projects. Mexican Stock Exchange accepts bonds linked to a company’s balance sheet, a specific income destined to Green project or a project’s assets, and linked to Asset-backed securities (ABS).
Green bonds open up for Mexico a new market with tremendous growth potential and scalability, as it provides certainty for investors through transparency, knowing where the financial resource comes from and where is it going to be allocated. For the issuer, along with showcasing its commitment to corporate environmental responsibility, it diversifies investor portfolio. For investors, it diversifies their investment portfolios with low carbon emission or carbon mitigating assets.
Nacional Financiera (NAFIN), a Mexican Development Bank, pioneered green bond issuance in Mexico, back in November 2015, with US$ 500M to finance wind energy projects. Grupo Aeroporturario de la Ciudad de México (GACM), the public company in charge of operating the soon-to-be new Mexico City’s Airport followed suit in September 2016, with two bonds of US$ 1M each for sustainable construction, energy efficiency, renewable energy, water and waste management. Finally, Mexico City issued a MX$ 1B bond directed towards clean transportation, energy efficiency, as well as water and waste management. Both government entities are preparing to issue another bond (separately) before the end of 2017.
Award-winning Green Bonds
Climate Bonds Initiative, the international investor-focused non-profit organization in charge of mobilizing the US$ 200T (yes, “T” is for “Trillion”) bond market for climate change solutions, awarded Mexico City’s New International Airport (NAICM) for the largest green bond emitted worldwide for a non-financial corporation. The bond was also nominated for the Green Bond Pioneer Award 2016. This award stacks up with the accolades for best infrastructure financing and best project financing loan by the LatinFinance publication in 2016.
Investors’ Declaration Supports Green Bonds
As the first document of its type in Mexico, a conglomerate of 57 financial entities, which together control over 20 percent of the country’s GDP, signed back in May 31st, 2017, a joint declaration in favor of green bonds. In it, the consortium committed itself to engage in productive conversations with the Climate Financing Consulting Council (CCFC), the private sphere and government authorities, to promote climate financing and develop a scalable and solid green bonds market, and face the challenges that climate change can pose to investors. The CCFC anticipated that in the next three to five years, Mexico will witness between 15 to 20 recurrent green bond emissions.
Mexico’s future never looked greener.
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