Mexico City has become the first city in Latin America to launch a “green bond”, raising $50 million from private investors to fight climate change. The goal is to reduce the equivalent of 10 million tonnes of carbon dioxide with things like LED lighting and better public transport. Mexico City already issues regular bonds to the tune of $200 million a year and has an AAA credit rating.
Results & Impact
Mexico City has succeeded in finding buyers for the total $50 million issued. It was oversubscribed by two and a half times, prompting plans for the city to issue another as soon as August. The first bond is supposed to help avoid 10 million tonnes of carbon dioxide emissions
Mexico City, the development bank Nacional Financiera, S.N.C
Private investors buy the bond on the proviso that the money will go to funding specific city projects that reduce emissions and combat climate change. These include installing LED street lighting, modernising the public transport system, and scrapping the city’s microbuses. Investors are guaranteed a return of 6.58%, plus a potential bonus of 0.42%, and the bond runs for five years
Cost & Value
$50 million for the bonds and $150,000 for the certification of the bonds
Running since 2016
Mexico City had to apply for certification of authenticity of the green bonds before they could be issued. This took around three months and cost $150,000
This is the fourth green bond issued by Mexico, with another used to fund a new airport in Mexico City. This is the first in Latin America to be issued by a city itself. Mexico City already issues regular bonds to the tune of $200 million a year and the city has an AAA credit rating
Mexico City has become the first city in Latin America to launch a “green bond” by releasing a $50 million issuance which will pay for energy-efficient lighting, upgrades to public transport and water infrastructure.
Mexico City’s goal is to reduce the equivalent of 10 million tonnes of carbon dioxide. The city has set itself seven strategies as part of its climate action program. These include installing LED street lighting, modernising the public transport system, scrapping the city’s microbuses and dealing with water leakage and rehabilitating the city’s pipes.
Green bonds are debt issues by cities who specify which green projects will be financed by the debt. The cities also specify the term of the debt. In the case of Mexico’s green bond, the term is five years. Every year, Mexico will report a series of technical and financial progress reports to Mexbol, the country’s stock exchange.
Mexico’s green bond was so popular it was oversubscribed two and a half times over. Mexico City’s issuance has received attention around the world. Mayor Miguel Angel Mancera recently flew to London to accept an award from the Climate Bonds Initiative, a research group that tracks the green bond market.
Those who buy green bonds do it on the guarantee they’re committing to guaranteeing only those projects which will have a positive impact on emissions reductions, and specifically climate change.
Mexico City already issues regular bonds at the tune of $200 million a year. The city has an AAA credit rating.
Mexico City had to certify its green bond, which gives it authority and authenticity in the eyes of investors – this process cost roughly $150,000. The bond is authenticated at Sustain Analytics in both Spanish and English. The certification process took three months and involved collaboration between the Environmental Ministry and the Finance Ministry.
Mexico City is also gearing up to issue another green bond as early as August this year. Investors are guaranteed a return of 6.58%, plus an additional 0.42% as a bonus. In total, the return could be 7%. Most of the investors are companies who already invest in retirement funds in Mexico.
The value of the green-bond market is around $131 billion – as yet, only 11% of green bonds are issued by local governments or cities.
Picture: Flickr/Kasper Christensen