30% of Mexican bonds in 2021 were GSSS

Channels: Green Bonds

Companies: Santander

People: Javier Perochena

Almost a third (30%) of the value of Mexican bonds in 2021 were green, social, sustainability or sustainability-linked (GSSS) bonds in an "amazing" sustainability surge for the nation, an executive from Santander said.

The country is "years behind" in its green financing but is now catching up on the progress of other markets, Javier Perochena, head of ESG solutions at Santander's Mexican arm, said during a webinar on green capital in Mexico.

"Even though this type of financing [only] started in 2016 in Mexico, due to Covid-19 we've seen an amazing catch-up here. The trend will continue."

In 2021, GSSS bonds worth MXN 83 billion ($4 billion) were issued, according to Perochena. Bonds without GSSS labels worth almost MXN 191 billion were raised the same year, he said.

Source: Santander, Grupo BMV, BIVA stock exchange and data provider Proveedor Integral de Precios, as of 19 April

That means Mexico almost tripled the global average proportion of bonds dedicated to GSSS in 2021. GSSS bonds accounted for around 11% of total global bond issuance in 2021, up from less than 7% in 2020, according to Moody's ESG Solutions.

Over half of outstanding GSSS issuances (56%) in Mexico were sustainable bonds, while just 18% were green, Perochena said – bucking the global dominance of green bonds.

Source: Santander, Grupo BMV, BIVA stock exchange and data provider Proveedor Integral de Precios, as of 19 April

However, sustainability-linked bonds will become increasingly prominent in the country, as Mexican issuers prefer key performance indicators to use of proceeds, Perochena predicted.

Last year saw the country's first issuance of sustainability-linked bonds, but there have been "a lot of them" since, he said.

In Latin America and the Caribbean (LAC) around 44% of use of proceeds in GSSS bonds have been taken up by energy-related categories, according to Marcela Ponce, climate finance lead for LAC at the International Finance Corporation (IFC).

Other significant categories for the region have included transport, land use and water, she said. However, Ponce said the focus of GSSS bonds is "changing" and she hopes to see increases in usage of other categories.

Timothée Jaulin, head of ESG development and advocacy at Amundi, said: "For [Amundi] ESG in emerging market is critical because this is where you find impact, additionality and yield."

Amundi, which manages the world's biggest green bond fund focused on emerging markets, had invested into 25% of all primary green bond issuances in emerging markets outside China, Jaulin said. "That's a really significant number," he said.

Francisco Valle, issuer director at BIVA, said the stock market was "one of the main engines" behind ESG finance in Mexico.

The webinar was presented by the IFC in collaboration with Environmental Finance. 

To view the webinar on-demand, please register here.

Thomas Cox