of orders for Mexico’s €750 million SDG Bond
"We wanted to ensure that the bond performs well in the secondary market – the listing on London Stock Exchange will contribute to that."
For many issuers, an important attraction of the Sustainable Bond Market is that it can bring their debt offerings to a new class of investor. That was a key consideration in the decision of the Mexican Federal Government to issue its inaugural €750 million bond linked to the 2030 Agenda and the Sustainable Development Goals (SDGs); established by the international community as a “blueprint to achieve a better and more sustainable future for all”.
“We wanted to expand our investor base,” explains Gabriel Yorio González, Mexico’s Deputy Finance Minister. After considering a number of other debt markets, “we identified the Sustainable Bond Market as the fastest growing and most liquid option.”
“From a sustainability perspective,” he adds, “the bond is a way to demonstrate our commitment to the SDGs agenda”, focusing on Mexico’s efforts to address climate change and to reduce the country’s social and economic inequalities.
A novel approach to sustainable bonds
Mexico’s SDGs Bond takes a novel approach. Most sustainability bonds are linked to specific projects identified before the bond is issued. However, the SDGs Sovereign Bond Framework developed by the Mexican government, on which the bond is based, links the entire Federal Budget to the SDGs, and applies geospatial eligibility criteria to ensure that only budgetary items targeting municipalities with the greatest Sustainable Development Goals shortfalls are selected.
The framework involves the participation of the UN Development Programme as an observer, and ensures high levels of transparency regarding its methodology, mapping of expenditures and impact reporting, says Yorio González.
High investor demand
The bond was more than six times oversubscribed which, while not unusual for a conventional bond from Mexican federal government, was a pleasant surprise given the innovation involved in the listing, Yorio González adds.
The listing venue – London Stock Exchange’s Sustainable Bond Market – was a first for Mexico, allowing it to tap into demand from new investors.
“We decided to list the bond in London because of the network of sustainable investors that London Stock Exchange has,” he says.
“We also wanted to ensure that the bond performs well in the secondary market – the listing on London Stock Exchange can contribute to that,” he adds.
The SDGs Bond is intended to be the first of a series. “We want to be a recurrent issuer of sustainable bonds,” he says. “We have enough eligible green and social expenditures to cover all our future redemptions over the next five years.”
The SDGs Bond has firmly established Mexico as a key sovereign issuer within the sustainable capital markets and demonstrates the value that London Stock Exchange offers in bringing such issuers and investors together.
More case studies
Setting a sustainable standard
Standard Bank’s inaugural green bond marked a number of firsts, and the South Africa-based bank is confident it won’t be the last.