Mexico City Mayor Miguel Angel Mancera on innovative climate action finance and the first green bond issued by a Latin American city
By Miguel Angel Mancera, Mayor of Mexico City
Mexico City is one of the world’s biggest cities, with 8.9 million inhabitants and multiple climate and environmental challenges. In order to address and mitigate the impacts of climate change, Mexico City developed a Climate Action Program (PACCM 2014 – 2020) with seven strategic areas to reduce 10 million tons of CO2e by 2020 and to build resilience for our citizens. We are also one of the few cities that have incorporated gender-responsive actions in our Climate Action Program in areas where women are more likely to be impacted by climate change.
According to C40’s Deadline 2020 research, cities should reduce emissions to almost 3 tCO2e per capita by 2030 and implement 14,000 climate actions by 2020 in order to follow the path towards the 1.5°C goal of the Paris Agreement. This requires an investment of US $1 trillion from 2016 to 2050. To meet the financial gap, cities need the support from national governments, but today’s financing architecture does not always respond to cities’ needs. Financing climate action is easier said than done.
Local governments encounter diverse obstacles to financing climate actions, because we typically depend on national resources. In this context, cities have to innovate and find solutions to finance our climate action programs. Mexico City is committed to this effort, and in December 2016, we became the first city in Latin America to issue a Green Bond for $1 billion pesos (US $50 million).
In order to issue the CDMX Green Bond, the city had to accomplish four basic things: 1) have defined sustainable programs and policies; 2) be able to prove transparency processes; 3) have healthy finances; 4) and develop an integrated work plan in coordination with the local Ministry of the Environment and Finance, along with national institutions.
The resources from the Green Bond will guarantee projects’ technical capacity and will be used to finance large scale actions related to sustainable transport, energy efficiency and comprehensive water management initiatives.
The success of the first Mexico City Green Bond was bigger than anticipated, and the demand for investment was more than twice the calculated rate. The TIIE+ rate was of 0.42 contrasting the expected 1%. Due to these positive results, Mexico City is preparing to launch a second Green Bond package in August this year.
We hope that Mexico City’s experience will set a path for other Latin American cities to replicate the initiative, boost learning and intersectorial exchanges and promote the implementation of large scale sustainable projects, as well as their monitoring and reporting.
Watch below to hear directly from the city’s Secretary of Finance, Edgar Amador, Secretary of Environment, Tanya Müller, and the bond’s underwriter, HSBC's Yumar Muñoz, on the lessons they learned issuing the city's first Green Bond (webinar recorded on Wednesday 24 May 2017.