Mexico - Building Sustainable Value Chains Project

Overview & Synopsis

Building Sustainable Value Chains Project for Mexico has the development objectives to enhance the sustainability of Mexican small and medium enterprises (SMEs) and mid-cap firms and promote their integration in global and regional value chains. Component 1: Promoting access to sustainable finance for Beneficiary Enterprises (BEs) supports labeled sustainable finance through two complementary interventions that expand long-tenor debt tied to measurable sustainability outcomes; Sub-component 1a: First-tier line of credit to improve the sustainability of BEs provides Sustainability-Linked Loans (SLLs) and, where appropriate, Green Loans (GLs) directly through Nacional Financiera (NAFIN) to mid-cap firms and potentially SMEs, requiring company-wide Sustainability Plans with material Key Performance Indicators and timebound Sustainability Performance Targets, ex-ante validation and ex-post verification by an independent validation entity, linking pricing incentives to verified performance, and ensuring each SLL includes a greenhouse gas (GHG) reduction KPI with at least 50 percent of portfolio GHG reductions derived from energy-related measures, while GLs follow a use-of-proceeds approach aligned with Mexico’s Sustainable Taxonomy and positive lists, with at least 40 percent of the GL portfolio financing clean energy–related investments and compliance verified through documentation and Monitoring, Reporting and Verification (MRV); Sub-component 1b: Second-tier line of credit to improve the sustainability of SMEs and mid-cap companies channels MXN-denominated GLs, and over time SLLs, through Participating Financial Institutions (PFIs) to finance eligible investments that reduce carbon footprints and strengthen resilience, with PFIs monitoring use-of-proceeds and reporting to NAFIN, market-based pricing with only time-bound, limited concessionality for early uptake, and co-financing from PFIs and BEs to mobilize private capital; Sub-component 1c: Support for the preparation of Sustainability Plans provides targeted assistance for preparing, validating, and verifying Sustainability Plans required for SLLs. Component 2: Capacity building, technical assistance, and project management strengthens the ecosystem needed to scale sustainable finance by (a) enhancing NAFIN’s capacity to design, implement, monitor, and report on SLLs and GLs through a Sustainable Finance Framework, internal procedures, manuals, positive lists, and digital MRV systems, exploring when warranted a Partial Credit Guarantee for de-risking SME sustainability lending, undertaking project management to meet procurement, financial management, environmental and social standards, citizen engagement, and gender commitments, and partnering with anchor companies and industry associations to build demand; (b) building PFIs’ capabilities to originate, appraise, and monitor GLs and, over time, SLLs using guidance, templates, and tools; and (c) supporting BEs—especially SMEs—to identify taxonomy-aligned investments, prepare feasibility analyses, establish MRV capacity, obtain required certifications for value-chain participation, and complete Sustainability Plans with validated targets, thereby reducing transaction costs and accelerating uptake.