BMV of Mexico: Facing climate change through green bonds

In a recent post on the Mexican Stock Exchange (BMV)’s blog, Gabriela Soni, the Chief Investment Officer of UBS Wealth Management Mexico, summarizes the evolution of green bonds both at local (Mexico) and global level, highlighting their importance facing climate change.

The author remarks that during year 2021 Mexico reached a historical maximum with the placement of 12 green bonds, but despite this explosive growth, the demand for green bonds has exceeded the offering. This has caused that in Mexico green bonds are often issued at a higher price than comparable conventional bonds (green premium by scarcity).

She also points out that although there is still not enough information on the behavior of green bonds during recessions, they could be expected to be more defensive in the event of a market sell-off. This is explained because the main holders of these bonds tend to have a long-term investment horizon and to maintain positions.

Finally, the author concludes that the development of renewable energy to meet decarbonization goals will require trillions of dollars of investment. In this context, green bonds play a crucial role in financing the transition to a more sustainable global economy.