Scotiabank’s Mexican subsidiary has solidified its commitment to sustainable finance by issuing its inaugural Green Bond in the Mexican market. This significant move, executed on September 11th, marks a milestone for Scotiabank Mexico and the burgeoning ESG (Environmental, Social, and Governance) debt market in the region. The Green Bond was part of a broader three-tranche offering designed to bolster Scotiabank’s sustainable financing platform and address diverse investor needs. This 3-year floating-rate MXN$4.3 billion (~US$219 million) Green Bond is not only the first labelled debt issuance in Mexico but also Scotiabank’s fifth benchmark labelled issuance across its global footprint.
This pioneering Green Bond underscores Scotiabank Mexico’s dedication to advancing global climate-related finance initiatives. It leverages Scotiabank’s extensive sustainable financing experience throughout North America, particularly within Mexico’s rapidly expanding ESG debt sector. This issuance positions Scotiabank Mexico as a key player in driving sustainable investment within the country.
“We are thrilled to introduce this Green Bond to the Mexican market,” stated Daniel Gracian, Director, Sustainable Finance, Scotiabank. “This launch highlights the strength of our local teams and their exceptional ability to cater to the investment demands of dynamic markets like Mexico.” This sentiment emphasizes Scotiabank Mexico’s local expertise and commitment to the Mexican financial landscape.
Key Details of the Green Bond Transaction
The transaction was structured as a 3-tranche offering to accommodate varied investor preferences regarding terms, rates, and currencies. The details include:
- Green Bond: MXN$4.3 billion (~USD$219 million) 3-year Floating Rate Green Bond due in 2027. This is the landmark issuance for Scotiabank Mexico.
- Fixed Rate Notes: US$23.8 million (~MXN$472 million) 3-year Fixed Rate Notes due 2027.
- Fixed Rate Notes: MXN$3.9 billion (~US$200 million) 7-year Fixed Rate Notes due 2031.
The market response was overwhelmingly positive, with the order book reaching an oversubscription of 2.39 times the targeted amount of MXN$5 billion (~US$252 million) on the pricing date. This strong demand for the Scotiabank Mexico Green Bond demonstrates investor confidence and appetite for sustainable investment opportunities in Mexico. The robust order book allowed the transactions to be priced at IPT (Initial Price Talk) levels over benchmark rates, reflecting the attractiveness of the offering.
Collaborative Approach to Gauge Local Market Feedback
Scotiabank Mexico’s team adopted a collaborative marketing strategy to effectively gauge local investor sentiment. This involved conducting 14 individual video conferences with key investors and engaging with a broader investor group across Mexico. This proactive approach ensured that the offering was tailored to meet the specific needs and preferences of the Mexican investment community.
“During our meetings, we observed a significant demand for this type of issuance in the local market,” noted Vinicio Alvarez, Managing Director and Head, Debt Capital Markets, Mexico. “We believe this offering effectively addresses a wide spectrum of investment requirements, and we are proud of our collaborative methodology and the successful outcomes we achieved.” This highlights Scotiabank Mexico’s dedication to understanding and serving the Mexican market.
Global Climate Initiatives Supported by Scotiabank Mexico
The net proceeds from Scotiabank Mexico’s Green Bond offering will be strategically allocated to finance or refinance Eligible Green Assets, as defined within Scotiabank’s Sustainable Issuance Framework. This framework ensures transparency and alignment with global sustainability standards.
Scotiabank’s overarching commitment includes providing C$350 billion in climate-related financing by 2030. Daniel Gracian highlighted the substantial progress already made, with C$132 billion allocated towards this ambitious target since November 2018. This demonstrates Scotiabank Mexico’s contribution to Scotiabank’s global sustainability goals.
The Scotiabank Mexico Green Bond follows several key sustainable finance initiatives undertaken by Scotiabank in 2024, reinforcing its global leadership in sustainable finance:
- September: Scotiabank issued inaugural CAD Sustainability notes, the largest labelled issuance by a Canadian financial institution or corporation and the first from a major Canadian bank since 2021. These notes uniquely allow for the allocation of proceeds to nuclear energy.
- April: Scotiabank issued its first green bond in the European market, at the time the largest green or sustainability bond offering by a Canadian financial or corporate entity in that market.
- April: Scotiabank became one of the first Canadian Domestic Systemically Important Banks (DSIBs) to launch a Sustainability GIC for retail and small business clients, broadening access to sustainable investment products.
“Our sustainable issuance program has evolved significantly over the years, providing crucial momentum for this Green Bond launch in Mexico,” stated Agnes Varatinskaite, Director, Term Funding and Capital Management, Scotiabank. “Collectively, these issuances underscore our dedication to playing a pivotal role in sustainable finance across global markets and serving as a trusted financial partner for our clients.” This global perspective emphasizes the strategic importance of Scotiabank Mexico within Scotiabank’s broader sustainable finance strategy.
Scotiabank’s Growing Leadership in Latin America
Scotiabank Mexico plays a crucial role in Scotiabank’s expanding presence and influence as a key advisor and lender for sustainable projects throughout Mexico and Latin America. This strategic focus has resulted in a significant rise in Scotiabank’s regional league table rankings. Scotiabank Mexico is central to this growth in the region.
Specifically in Mexico, Scotiabank Mexico holds a prominent market position:
- Ranked as the fifth-largest bank in credit market share.
- Ranked as the sixth-largest in deposits.
- Holds an impressive 18.6% market share for ESG bonds, leading 17 issuances and ranking among the top underwriters of labelled debt capital market products. This leadership position highlights Scotiabank Mexico’s dominance in the Mexican ESG bond market.
Alt Text: Scotiabank Mexico: Top Underwriter of Local Bonds in Mexico, demonstrating leadership in the ESG bond market with MXN$ Billions in underwritten value.
“Mexico and Latin America are now at the forefront of sustainable financing innovation and issuance, and we are well-prepared to meet the increasing demand for products like Green Bonds,” stated Gracian. “Our strategic positioning across the Americas, coupled with a dedicated regional sustainable finance team covering LatAm, enables us to leverage crucial synergies and drive market innovation.” This statement underscores Scotiabank Mexico’s strategic advantage in the region.
Scotiabank Mexico’s robust presence in the country is a key differentiator, enabling it to effectively serve clients across diverse business lines operating within the USMCA (United States-Mexico-Canada Agreement) free-trade zone. With the growing nearshoring trend, the commercial opportunities within the North American corridor are expanding, further emphasizing the strategic importance of Scotiabank’s strong presence throughout the continent, with Scotiabank Mexico as a vital hub.
The Scotiabank Mexico team possesses deep sustainability and finance expertise, enabling them to offer robust business advice and innovative solutions for sustainability challenges across various industries and sectors.
Scotiabank’s Sustainable Finance group has received numerous accolades, reinforcing its position as a leading bank for sustainable finance across the Americas. Notable recognitions include Best Bank for Sustainable Financing in Emerging Markets (Global) and Best Bank for Transition/Sustainability-Linked Loans (Latin America) by Global Finance in 2024. These awards further validate Scotiabank Mexico’s contribution to Scotiabank’s overall success in sustainable finance.
Mexico: A Market Poised for Sustainable Growth
The issuance of ESG-labelled bonds in Mexico has experienced substantial growth, increasing by over 35% year-over-year in 2023. Impressively, year-to-date, over 45% of all local bond issuances in Mexico carry an ESG label, indicating a strong market shift towards sustainable finance.
In 2023, the Mexican government further demonstrated its commitment to sustainable finance by publishing the Mexico Sustainable Taxonomy and the Sustainable Finance Mobilization Strategy. These governmental initiatives are crucial in supporting the continued development of the sustainable finance market, creating a favorable environment for corporations and global financial institutions like Scotiabank Mexico.
The Future of Sustainable Finance in Latin America
Innovation in ESG-labelled debt is also expanding across Latin America, with countries like Chile and Brazil pioneering new sustainability financing products. These include:
- Blue bonds, supporting projects focused on water security and marine and ocean conservation.
- Resiliency and biodiversity bonds and loans, addressing critical environmental challenges.
- Innovative product combinations, such as green sustainability-linked loans and bonds, merging different sustainable finance instruments.
- New financing structures, including sovereign sustainability-linked bonds with step-up/step-down mechanisms, offering flexible and impactful financing solutions.
The region is expected to see increased demand for sustainable finance products with a social focus. The concept of a just transition emphasizes the need for inclusivity in the shift towards a lower-carbon future, particularly for vulnerable communities disproportionately affected by climate change. Scotiabank Mexico is positioned to play a key role in this evolution.
“Our goal is to be a trusted bank in every market we serve. By continuing to strengthen our leadership in the region, engaging collaboratively with local market stakeholders, and enhancing our capabilities, we are confident in our ability to deliver sustainable financing products that recognize and incentivize positive ESG performance,” concludes Alvarez. This reinforces Scotiabank Mexico’s commitment to the future of sustainable finance in the region.
For further information, please contact:
Daniel Gracian
Director, Sustainable Finance
Phone: 416-845-7906
Email Daniel
Vinicio Alvarez
Managing Director and Head, Debt Capital Markets, Mexico
Phone: 52-55-13845422
Email Vinicio
Agnes Varatinskaite
Director, Term Funding and Capital Management
Phone: 647-539-6471
Email Agnes
Learn more about our Sustainable Finance Group
References
- Scotiabank. 2023 Climate Report, p. 3.
- Scotiabank. “Scotiabank Issues $1.25 Billion Sustainability Notes.” Scotiabank Investor Room, September 26, 2024.
- Scotiabank, with information from Bloomberg, BMV, BIVA, CNBV and Valmer, as of September 17, 2024. Excludes self-led and USD-denominated transactions.
- Scotiabank and Valmer as of October 2, 2024. Excludes Global Peso. Excludes self-led and USD denominated transactions.
- Scotiabank. Financing the Future, Sustainable Finance, Latin America 2023 Outlook.
