Mexican green bonds may get a lift on two fronts as the country moves towards its target of having 35% of its energy come from renewable sources by 2024.
Mexico’s Stock Exchange has helped set up Mexico2, a carbon trading platform that is working on bringing green bonds to Mexico’s domestic market, while officials at government-owned oil company Pemex have said that issuing a green bond is “still on their minds”.
Pemex has been looking at the possibility for more than two years but says it wants to ensure any deal would have a real environmental effect.
“If we were to do a green bond, we would do it to support projects that otherwise would not get done,” says Pamela Bendímez, financial analyst in the capital markets team.
This may be a crucial factor in attracting SRI investors if the most recent example of a Latin American green bond is anything to go by. Although Brazilian food group BR Foods sold what it called a green bond in June, the green-specialist component of the order book was a small minority.
Some green investors who looked at the BRF deal said they wanted to see tighter restrictions on the use of proceeds, while others said they believed that — although BRF did indeed have some green projects — these would have been in their regular capex spend with or without the green bond.
Head of Pemex’s carbon finances office, Paulina Serrano, said that the issuer wanted “to be able to continue driving forward a culture of social responsibility and give priority to green projects like energy efficiency”, but had “important internal challenges” to overcome.
“As a state-owned company, our main aim is to maximise revenues, as we are responsible for a large proportion of government revenues,” says Serrano. “In today’s environment of budget cuts, even though energy efficiency projects are profitable, they are not on the same scale as other investments.”
Emmanuel Quevedo, deputy manager of capital markets and derivatives, said that a green bond “would help to give priority to green projects”.
Pemex started its moves towards a green bond by designing criteria of eligible projects and then contacting banks. These banks were “not sure if investors were ready to invest in a green bond for an oil and gas company”, said Bendímez.
“If we are able to quantify the environmental effect of a green bond it will be easier for banks and investors.”
One restriction for Pemex is the ring-fencing of proceeds that many green investors require.
Although Bendímez admitted this was a challenge for Pemex, she said they were proposing “different mechanisms to assure that proceeds from the issuance would be allocated in green projects”, suggesting that an internationally recognised audit firm could ensure the proceeds are spent where they should be.
Sources suggested that Pemex was unlikely to issue a green bond until 2016.