We know that Mexico is working, through the Ministry of Environment and Natural Resources (Semarnat), on updating the Nationally Determined Contributions 3.0, within the framework of the Paris Agreement (2015).
Today, 10 years after the signing of this important agreement, and the last update in 2020, countries are preparing to present their new contributions at COP30 in Belem, Brazil, aimed at expanding climate ambitions, establishing greater commitments to reduce greenhouse gas emissions, and to adapt to the new reality presented by climate change.
This is an unprecedented challenge. For several decades, scientists, economists, civil society, and governments around the planet have been trying to find solutions to limit the increase in global temperature.
Currently, updates to NDCs are relevant, as we are experiencing a changing world, with a geopolitical context very different from that of five years ago, and where many established interests and commitments are being affected. To achieve the national commitment (to reduce GHG emissions by 35% by 2030), Mexico requires the immediate implementation of all available instruments, such as a strong sustainable finance market, environmental taxes, an operational emissions trading system, and the design of nature-based solutions (NbS).
Despite notable technological advances, the creation of new capabilities around climate risks and innovative tools that allow better risk management, and the integration of ESG factors in business models, credit portfolios, and investment portfolios, we could say that climate and sustainable finance agendas are under attack.
On the one hand, we are raising our ambition to reduce GHG emissions and designing new adaptation plans with more inclusive commitments; on the other hand, we are experiencing the contamination of recent statements and actions that depressurize the impetus and socio-environmental responsibility of some financial institutions, which in the end, are the most powerful and important actors when it comes to financing the decarbonization of multiple economic sectors and achieve our goals.
The implementation of the new NDCs must have, as an essential condition, the support and commitment of all stakeholders, capital owners, and decision-makers who manage assets and investment projects. Delaying the transformation of credit portfolios and investment portfolios with more resilient and sustainable assets is no longer an option because reducing climate action, leaving international agreements, or changing the narrative today are inevitable costs that we will all pay in the very near future.
The task and role of financial institutions in achieving countries’ climate goals is crucial. Not long ago, we realized that government resources are not enough to transition to a low-carbon economy. Capital markets have an enormous opportunity in searching for a balance between profitability and sustainability, with innovation and development of new financial products and vehicles that generate positive impacts on climate change mitigation and adaptation, gender equality, and access to basic services.
To this end, we now have a science-based taxonomy that defines and classifies more than 120 sustainable activities, which are contemplated in priority economic sectors, including agriculture, transport, energy, water, construction, manufacturing, and waste. This is a fundamental tool for standardizing criteria and redirecting public and private financing toward projects with scale and positive impact. Objectives, standards, metrics, and thresholds are key indicators that allow us to understand the contribution of each sustainable activity and measure its impact on climate change mitigation and adaptation.
The taxonomy is a fundamental financial public policy tool to develop efficient markets. By using a common language available to all financial institutions, it is possible to generate financial products and the necessary information on sustainable financing flows, to monitor the results in a timely manner, and to achieve our climate goals.
The Mexican financial sector has the resources, dynamism, and key elements to transform its work and trigger the necessary transition in business models and production chains. It is time to understand again the role played by this sector. Only in this way is it possible to raise commitments again and return our gaze to our country, thinking about the future we leave to the next generations.
