Going for green: Mexico is a leader in issuing green bonds for environmentally sustainable projects

In an era where businesses and governments worldwide are working to combat the effects of climate change, green bonds have become popular as a capital market instrument. Structured much like any other corporate or sovereign bond, funds raised through a green bond are dedicated exclusively to investment projects with little environmental impact, or to those that seek to prevent or reverse negative environmental effects. “There is a strong trend driven by development and commercial banks, real estate companies and pension funds favouring a green financing agenda that is invigorating environmental, social and governance policies,” Gustavo Lozano, country manager for Mexico at Amundi Asset Management, told OBG.

Wide Use 

In January 2018 the Climate Finance Advisory Group published a Mexico-specific “Green Bonds Principles MX” report to provide clear guidelines to potential issuers and explain how funds are used. Both of the country’s stock markets, the Mexican Stock Exchange (Bolsa Mexicana de Valores, BMV) and the Institutional Stock Exchange, have listed green bonds.

Indeed, Mexico has become an active player on the world stage in this regard and the leader in Latin America, accounting for over half of the region’s green bond issuances. Nacional Financiera, one of Mexico’s six development banks, was the first entity to issue a green bond in September 2016 for MXN2bn ($103.4m) at a seven-year maturity. Another development bank, Banobras, has also been an active issuer, while the central government has been working since early 2019 to prepare a sovereign green bond issue. Here, Mexico would follow regional peers Chile and Colombia.

As the first city in Latin America to launch municipal green bonds in 2017, raising $50m to finance projects that would avoid an estimated 10m tonnes of CO from entering the atmosphere, Mexico City has since raised a second and third round of funds in November 2017 and August 2018. The money was to be dedicated to energy efficient lighting, public transport and water infrastructure projects. In September 2018 Mexico City became the first city in Latin America to sign the Green Bond Pledge, a commitment to increase the use of green bonds for infrastructure financing.

The private sector has been participating in green bonds, too. In late 2018 Mexico’s largest bank, BBVA México, issued a MXN350bn ($181m) five-year green bond – the first by a private bank in the country. The funds are to be used to finance three wind farms and energy-efficient buildings. The bank was recognised in the 2019 Green Bond Pioneer Awards for its firstmover efforts, both in Mexico and its Spanish home market. Meanwhile, water company Rotoplas issued its own MXN2bn ($103.4m) sustainable corporate bond in mid-2017 for water treatment and reuse projects.

In March 2019 the BMV hosted the second Pacific Alliance Conference on Green Financing, bringing together stakeholders from Mexico, Chile, Colombia and Peru. Of the four countries, Mexico boasted the most in social, sustainable and green financing, with 12 issuances to date – of which five were purely green bonds – amounting to MXN32.5bn ($1.7bn).


Despite their fairly widespread use, green bonds in Mexico have also faced some setbacks. The country’s most high-profile green bonds were two instruments totalling $6bn with maturities of 10 and 30 years to finance the carbon neutral terminal buildings of the new Mexico City airport, issued in 2016 and 2017. Before he became president, Andrés Manuel López Obrador caused some consternation among investors and advocates alike when he announced the cancellation of the project in October 2018, despite it being around one-third complete. Although investors are being made financially whole and the price of outstanding bonds had largely recovered by the summer of 2019, it introduced a degree of policy uncertainty and reputation risk for the asset class. Due to their scale, these bonds helped explain why Mexico ranked so highly in terms of green bond issuances globally.