Mexico issues groundbreaking SDG Bond at $890 million

15 / 09 / 2020

By Marwa Nassar - -

Mexico has become the first country in the world to issue a Sovereign Sustainable Development Goals (SDGs) Bond, an important step forward in the country’s commitment to the achievement of the SDGs, and a major advance for development finance.

Mexico issued the groundbreaking seven-year SDG Bond for a total value of $890 million, resources that will be transferred from private funds to finance SDG-oriented programs.

This innovative bond was issued under its new “SDG Sovereign Bond Framework” developed with investment bank Natixis, and released in February. The transaction reached a demand of $ 5,696 million, equivalent to 6.4 times the allocated amount. 267 global investment firms participated in the operation.

“This initiative is an important step forward in the development of a market for SDG financing at a large scale and an innovative mechanism to tap into the private capital market to finance SDG-related programs. UNDP values the invitation of the Government of Mexico to contribute to this initiative and wishes that other countries can soon follow,” said United Nations Development Program (UNDP) Administrator, Achim Steiner.

The UNDP was invited by the Government of Mexico to partner with them in this initiative. UNDP provided an opinion in the form of an alignment letter on the Framework and welcomes its unique features, including the use of the SDGs as an entry point, and an eligibility criterion that includes collecting spatial data to identify the most deprived communities. UNDP will also provide an opinion on the impact report. Investors welcomed UNDP’s participation which, they said, strengthens the transparency and validity of the impact reporting.

In 2015, 195 countries agreed on the “2030 Agenda for Sustainable Development”. The UNDP has a long relationship with the Government of Mexico, supporting its development efforts and progress towards sustainable development. For example, UNDP has collaborated on Mexico’s innovative initiative to map its federal budget against the SDGs.

As stated by the Government of Mexico, “with this transaction, the Ministry of Finance inaugurates Mexico’s sustainable financing program and places the country at the forefront in the innovation of sustainable financing instruments. In addition, the bond issuance allows the country to expand its investor base by accessing international funds committed to sustainable economic development.”

UNDP believes that the SDG Sovereign Bond Framework contributes to Mexico’s commitment to achieving the SDGs in three specific ways; it strengthens budget transparency; it increases earmarked spending for sustainable development programs, and it contributes to the development of the local and international capital markets aimed at development finance.

“UNDP congratulates the Government of Mexico on the development of the SDG Sovereign Bond Framework and the successful issuance of its first SDG Sovereign Bond, and looks forward to providing technical assistance during the preparation of the impact report,” said Lorenzo Jimenez de Luis, UNDP Resident Representative in Mexico.

UNDP works around the world helping bond issuers introduce development impact factors at all stages, using the framework of the Sustainable Development Goals (SDGs). With 17 goals, there are opportunities for bond issuers to address gender, health, education, sustainable communities’ issues, and many more. Just as green bonds have raised awareness of climate risks and stimulated the development and financing of projects focused on carbon reduction, the SDG bond market can raise awareness across the broad investment community of the societal challenges we currently face – and actively address those challenges.