Green bonds must be more transparent

Until today, in Mexico, no case of greenwashing in the green and sustainable bond market has been detected, denounced or evidenced, specialists assured.

This market grows year after year in Mexico. Since its emergence in 2015, 128 offers have been launched and financing for 644,428 million pesos has been channeled, until the first quarter of this 2023 through the issuance of thematic bonds (call them green, social, sustainable or linked to sustainability), according to data from the Mexican Council of Sustainable Finance.

So far this year, 93,412 million pesos have been issued. Sustainable sovereign bonds have had the largest participation with 56% of the resources obtained, followed by sustainable bonds with 17% and bonds linked to sustainability with 14 percent.

With these resources financing initiatives that demonstrate environmental and social benefits, no cases have been detected in which issuers have committed fraud, deceiving investors, saying that their project is “green” or has real benefits to the environment or society when in reality it is not so. Specialists explain why?

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“Until now, we have not seen any type of greenwashing because the issuers worked ‘quite’ to see what projects can be financed that really have that environmental or social benefit, they are entities that have studied a lot and have been really committed to sustainability in terms of environmental and social”, said Luisa Adame, director of HR Ratings Sustainable Impact.

Alba Aguilar, general director of the Mexican Council of Sustainable Finance, said that no case of “greenwashing” has been detected in the Mexican thematic bond market because it is “relatively new”, it is being developed and, therefore, it lacks elements in order to ensure its integrity under approved definitions, its own language and rules. “These are issues that are being built.”

He explained that what has happened is that there are issuers that usually do not present reports to make the use of resources and the results of the projects financed transparent.

We did an analysis after a broadcast to see which companies or entities submitted reports and there is a 30% that does not report after its placement. Reporting is a guarantee to be able to evaluate the impact and benefits of projects on environmental issues; it is a way of saying that there is or is not greenwashing,” he said.

The specialist explained that the reports are voluntary and the fact that they are not submitted does not necessarily mean that the project is not green or that they are doing other activities different from those of the prospectus.

For Adriana Pulido, general director of Ilunka, an ESG and Sustainability strategic planning agency, something “very good that is happening in the world” is having evaluations more attached to hard data that help to know if greenwashing is being done.

He said that in the United States such cases are already fined, in Brazil there have been initiatives and also in the European Union. Above all, the European Union and the United States will begin to request more requirements on these issues because the Intergovernmental Panel on Climate Change has said: ‘Enough of playing with actions to mitigate greenhouse gas emissions,’ he paraphrased. .

“There is no greenwashing because there is no specific legislation for the subject, that rather does not seem so good because in reality what it is telling us is that we are not being regulated enough to know if a company is having this practice or not, but Yes, there are laws related to these issues. For example, the Federal Consumer Protection Law that prohibits misleading advertising or the General Law of Ecological Balance and Environmental Protection”, Pulido warned.

How to shield yourself?

The specialists agreed that the new Sustainable Taxonomy of Mexico, prepared by the Ministry of Finance, is a great step to avoid this type of “misleading” practices. Even other internationally accepted standards such as those of the International Capital Market Association (ICMA) and the valuation of independent third parties have helped to filter this type of case before any occurs in Mexico.

“There has been a greater commitment from companies in sustainability issues and transparency in a market that is not yet regulated is essential to avoid greenwashing,” said Luisa Adame.

Adriana Pulido recalled that greenwashing is years old, but like other concepts it has been put on the table because investment funds and banks began to ask companies to answer how they are using the money to shield socio-environmental problems.

For this reason, he assured that one of the measures would be to measure and compare the capacity of the companies; develop technology and create new ways of operating; begin to put more on the table the level of compliance.

Alba Aguilar commented that investors have an important role in guiding companies in this transition because “it is also dangerous to say that there is greenwashing, not doing anything about it and not accompanying companies because it is a long-term process and I believe that Sometimes there is a lack of communication about the companies’ sustainability strategy”, he concluded.

judith.santiago@eleconomista.mx