Mexico’s fishing industry is the 14th largest in the world, highlighting the importance of protecting its coastlines and waterways. Scotiabank recently helped the Mexican government to issue a Blue Bond that makes funding available to invest in sustainable fishing and aquaculture.
A Blue Bond is a financial instrument to raise funds for investments in water projects, such as coastal climate adaptation, cleaning waterways, and supporting more sustainable fishing practices. This Blue Bond, issued in December 2024, amounts to MXN$4,500 million (est. $321 million CAD) and is backed by Fondo Especial para Financiamientos Agropecuarios (FEFA) the largest of four trusts created by Fideicomisos Instituidos en Relación con la Agricultura (FIRA), a Trust established by the Mexican Central Bank that offers credit and technical assistance to support the agriculture, livestock, fishing, and forestry sectors.
With this transaction, Scotiabank strengthens its position as one of the leading bookrunners in the sustainable bond market in Mexico. To help explain what this new financing tool means for the country, Perspectives sat down with Jose Jorge Rivero, Senior Vice President of Corporate Banking and Capital Markets for International Banking, and Daniel Gracian, Director of Sustainable Finance for Latin America at Scotiabank. Both helped facilitate the deal.
Question and Answer:
Perspectives: Daniel, for those who have never heard of Blue Bonds, can you explain what they are and how they work?
Daniel Gracian: Blue Bonds are financing tools to raise funds for water, marine and ocean-based projects aimed at helping the environment. They’re part of blue finance, which is a subset of green finance. All the Blue Bond proceeds are exclusively focused on water-related projects and activities.
In this case, the way the issuance works is through FIRA, a government-related entity that supports agricultural and related activities. The funds raised by the bond aim to support local fisheries and aquaculture projects, among others. This Blue Bond has a six-year tenor with a fixed rate.
Perspectives: What type of projects will Mexico’s Blue Bond fund?
Daniel Gracian: The Blue Bond’s framework outlines several projects that the funds are going towards including responsible aquaculture, low-impact coastal fishing and sustainable deep-sea fishing.
Perspectives: Jose Jorge, this is the first Blue Bond for sustainable fishing and aquaculture in Mexico. What does that mean for the country?
Jose Jorge: As a bank in Mexico and in the Latin American region, Scotiabank is supportive of developing sustainable bonds and financing. We have a commitment of $C350 billion to be deployed globally in climate-related financing by 2030, with Mexico being part of this.
This Blue Bond is our first in Mexico and we are really proud of that. We are exploring ways to continue our efforts in collaboration with the Mexican government, positioning our expertise and advisory services in both local and international markets.
Daniel Gracian: I also want to add that we aim to support our clients who want to grow and develop sustainable businesses. We believe there are opportunities that can lead to additional business growth in the country, more economic development, and food security, which is important in Latin America. And, of course, there are clearly the potential environmental benefits as well – improving water and minimizing pollution.
Perspectives: Jose Jorge, you touched on it a bit already, but can you further explain Scotiabank’s role in this Blue Bond?
Jose Jorge: Of course. Scotiabank was a joint bookrunner for the bond. This means that we helped FIRA get investors in the market interested in allocating capital to the bond and raised millions of dollars for this blue financial investment.
This Blue Bond’s goal is aligned to three Sustainable Development Goals of the United Nations 2030 agenda: Zero Hunger, Responsible Consumption and Production and Life Below Water, as outlined by FIRA in its Sustainable Bond Framework.
Perspectives: Daniel, take us through why it’s important to invest in sustainable fishing and aquaculture practices in Mexico?
Daniel: Mexico’s fishing industry is large, about MXN$42 billion (est. $3 billion CAD), and it's a source of income for hundreds of thousands of people. Not just the fishing activities, but also the entire supply chain that comes with it.
Sustainability and efficiency are obviously very important, and it's difficult as well. I feel Mexico has done a great job, setting up codes of conduct for responsible fisheries more than 20 years ago. In addition, several organizations in Mexico are working to promote science-based sustainable fisheries management. This includes supporting long-term fishing permits, which are one of the key aspects to ensuring that fishing is done in a responsible manner over time. Another way is biodiversity preservation, which can also be done through sustainable fishing and maintaining a balanced marine ecosystem. These are extremely important for climate change – everything is linked.
Perspectives: How are sustainable investments designed to support clients’ sustainability goals?
Daniel: There are two primary types of sustainable finance instruments that can support a blue economy. The first type is use-of-proceeds financing, which ensures that 100% of the funds are allocated to either green or social projects, as defined by national taxonomies or international standards such as those published by the International Capital Markets Association. The second type is sustainability-linked financing. These funds are not tied to specific projects but to specific environmental or social indicators and targets. If these targets are met, clients typically benefit from favourable pricing. Conversely, if the targets are not achieved, there may be adverse pricing implications.
Perspectives: To end things off, Jose Jorge, how does the blue bond align with the Bank's broader sustainable finance strategy in Latam?
Jose Jorge: I think it's setting a precedent, not only in Latin America, but globally. Mexico could face huge challenges in the future, including water issues, so this bond has helped us open the conversation for other types of blue bonds across the country.
So, I believe this is going to give that little nudge to other institutions that this is an important topic and that it can be done. This bond will hopefully support and develop the industry in Mexico, positioning the country as a leader in the Latin American region.
