Mexico includes gender equality and access to services in sustainable finance taxonomy

Plus Arab Monetary Fund issues guidelines on integrating ESG considerations within sovereign debt.

The Mexican finance ministry has published the first edition of the country’s sustainable finance taxonomy.

The main aims of the taxonomy, according to the finance ministry, are to promote capital mobilisation towards activities with positive environmental and social impacts, provide the Mexican financial sector with greater transparency, close social gaps, and reduce polluting emissions and vulnerabilities to climate change.

The taxonomy is aligned with various elements of other international financial taxonomies, including those of the EU and Colombia, as well as the Climate Bonds Initiative’s green bond taxonomy. Mexico’s version will initially be implemented on a voluntary basis.

Last August, Colombian financial regulator Superintendencia Financiera de Colombia revealed plans for a sustainable finance taxonomy for Central America. This followed the launch of the first Latin American green taxonomy in Colombia last April.

The environmental priorities in the Mexican taxonomy mirror those of the EU, with climate change mitigation and adaptation, biodiversity protection, water management, circular economy and pollution prevention topping the agenda.

Social objectives include gender equality and access to key basic services such as healthcare, education and financial inclusion, making Mexico’s the first sustainable taxonomy to incorporate green aspects, gender equality and sustainable cities. All these goals are aligned to the SDGs.

Mexico has not followed the EU’s classification of nuclear energy and natural gas as green activities, and therefore eligible for green financing.

A working group for the development of the sustainable taxonomy – made up of private sector representatives, international organisations and agencies, and subject matter experts – was first launched at the end of 2020 by the Mexico’s sustainable finance committee (CFS), which was established by the financial system stability council.

The taxonomy was developed with the assistance of international organisations including the Global Green Growth Institute, French development agency AFD, the German Agency for International Cooperation (GIZ) and environmental network Planisphera. It also received financing from UK climate finance fund UK PACT.

At the end of last year, two consultation processes were carried out to obtain feedback on the taxonomy draft. The first was a consultation made available to the financial authorities and trade associations of the financial system.

A survey was also launched for CFS committee members, with the participation of various financial actors including Banco de México.

The second process consisted of five roundtables with participants from the Mexican financial sector and the attendance of more than 300 representatives from financial trade associations and issuers.

The use of a taxonomy to define environmentally sustainable activities is increasingly being embraced across emerging markets. National classification systems are already in place in China, Malaysia and South Africa, in the later stages of development in Singapore, Thailand, the Philippines, Bangladesh and Vietnam, and at the regional level for ASEAN countries.

Guidelines for Arab states on ESG integration

Meanwhile, the Arab Monetary Fund (AMF) has issued guidelines for policymakers in the Middle East and North Africa on integrating ESG considerations within sovereign debt.

The guidance was produced after a survey revealed significant appetite among finance ministries in the 22 Arab League countries served by the AMF for issuing sovereign sustainable instruments, but concerns about the challenges involved.

Best practices recommended by the AMF include the creation of a high-level committee at national level comprised of relevant authorities such as the finance, environment, energy and transportation ministries, which would develop and coordinate a national strategy for sustainable finance.

The committee would also be responsible for selecting eligible projects for financing. As issuers, sovereigns are encouraged to align labelled debt to international standards until local or regional frameworks are developed. However, these should not veer too far away from existing standards to maintain investor trust, according to the document.

Finally, the guidance recommended that member states build databases of sustainable projects and launch initiatives to enhance ESG data collection.

This guidance was developed jointly by the AMF, the Gulf Capital Market Association and the World Bank. Standard Chartered and law firm Latham & Watkins contributed to the project.