Award for innovation - use of proceeds (sustainability bond): Mexico's SDG-aligned bond

The Mexican government pushed the boundaries of sustainability bonds with its second issue aligned to the UN's Sustainable Development Goals (SDGs).

In July 2021, the country's finance ministry raised €1.25 billion ($1.4 billion) with its second SDG-linked sovereign bond. Its previous issue was highly commended last year in the same category.

The bond from the upper middle-income developing country established a maturity date of 15 years.

This created a period linked to SDGs of eight years longer than the country's seven-year €750million SDG bond issued in 2020.

The latest transaction was about 70% sold to "ESG accounts", compared with 45% for its predecessor.

The opportunity to issue the new bond arose amid historically low interest rates, as central banks sought to offset the adverse economic effects of the Covid-19 pandemic.

The framework behind the bond links the Mexican government budget to 11 SDGs. The bond targets municipalities with the highest social gaps in the country. It calls this feature its "special geospatial eligibility criteria".

Gabriel Yorio, deputy finance minister, says: "Mexico updates the second-party opinion annually to guarantee the alignment of the framework with the International Capital Market Association's principles.

"Eligible expenditures are presented at technical committees of the 2030 Agenda annually to strengthen best practices on governance," Yorio says. The 2030 Agenda, which defines the 17 SDGs, was signed in 2015 by all UN member states.

"The UN Development Programme has accompanied us on both the eligible expenditures process and the elaboration of the first allocation and impact report," Yorio says.