This year, Mexico’s accumulated ESG bonds’ issuance surpassed $200 billion pesos. ESG bonds’ growth has been exponential in recent years, with 70 listed thematic bonds (29 sustainable, 17 linked to sustainability, 16 green, 7 social, and 1 blue) since the inception of this kind of instruments in the Mexican market. As a result, the share of these bonds has increased from 2% in 2016, to 44% in 2022. So far in 2023, 32% of the issued bonds in the market have a sustainability classification (BMV).
Globally, ESG bonds’ issuance has also grown from $3 billion, to over $270 billion dollars between 2011 and 2020. S&P estimates ESG bond issuance this year will be more than $1 trillion dollars.
Why are organizations opting for these bonds?
There could be many reasons for doing so, but, in our experience, there are 3 main rationales behind this:
- More investors: these bonds tend to attract more capital than traditional bonds, as more and more institutional investors have ESG commitments with their clients and conduct due diligence assessments with integrated ESG criteria.
- Lower cost: given reason #1, these bonds can be issued at lower interest rates (although academic studies show relatively small discounts to be honest).
- Market signaling: this type of issuance is also a way for issuers to show some kind of commitment to sustainability or their maturity level in ESG. Many companies see it as a way of demonstrating that they are serious about their efforts.
We expect to see sustainable issuances keep growing in coming years. There is enough appetite for them among investors, and the stock exchanges continue to make a great effort to help organizations acquire the necessary capabilities to achieve these issuances.
I hope you found this interesting. As usual, if there is anything we can help you with, or if there is an ESG topic you would like to know more about, please let us know.
CEO, Miranda ESG
Contacts at Miranda Partners