One of the most important issues in international forums where climate change is discussed has been the need to mobilize financial capital wisely to be able to assign it to high-impact tasks, which has been a challenge. The need to increase the effectiveness and efficiency of the use of money for climatic purposes has been emphasized. Within this context, LAB Mexico is a mechanism to rapidly meet this need.

LAB Mexico is an initiative that arises in 2019 and its origin is promoted by the Banks of Mexico Association (ABM), the Inter-American Development Bank (IDB) and the Green Finance Advisory Board of the Mexican Stock Exchange. The initiative can be defined as a multisectoral and institutional meeting space that promotes debate and exchange of experiences in the field of green finance, with the participation of the public and private sectors for the generation of financial innovations that support Mexico’s sustainable development.

One of the challenges of LAB is to invite other relevant actors to contribute with resources, practices and knowledge to drive the objectives of LAB Mexico; such is the case of the recent invitation made to GIZ to join the cause. At the beginning resources from the Mexican-German Climate Change Alliance  have allowed to carry out the first activities.

As part of LAB Mexico’s planning, the following statements have been set as strategic objectives:

• To create a shared and transparent agenda of initiatives that support the integration and coordination of similar projects, thereby avoiding duplicated efforts.
• To be recognized as a space that encourages discussion and innovation in the field of green finance.
• To recognize existing best practices and promote them instead of creating new ones, thereby avoiding duplications that dilute their impact.
• To awake the interest in private and public institutions to join this Laboratory to allow them to contribute from their sphere of influence with knowledge or resources in order to accelerate its impact.
• To identify bottlenecks for private investment in green financing especially in sectors such as energy, transport, agriculture, and water.
• To design innovative financial instruments to encourage climate investments.

Initially, LAB Mexico is organized into three working groups (WG) that help to structure the projects according to their vocation:

• Green banks: Propose business models that promote sustainable financing programs in different sectors such as transportation, agriculture, industry, and services in applications such as renewable energy, energy efficiency, or transitional or disruptive technology.
• Sustainable investments: Promote market development for sustainable investments in Mexico, especially green bonds, both at the level of issuers, investment banks, as well as potential investors.
• Sectoral initiatives: Support the development of a green model in public and private banking by creating capacities and a culture that fosters good practices in sustainable finance.

One of the first activities identified by the institutions that drive LAB Mexico is the need to foster a culture of social and environmental risk management in financial institutions. It is a reality that not considering the effects of climate change on  business models may jeopardize its continuity and profitability.

Other activities that are of high priority for LAB Mexico are the creation of business instruments and practices that allow financial institutions to facilitate a green model, especially by strengthening the products they offer with climate or sustainable vocation.

LAB Mexico will continue to promote sectoral initiatives, especially in the field of transport, agriculture, housing and energy. In a previous issue, the activities to be carried out  in the transportation sector were explained and the next challenge will be to strengthen the activities being carried out in the distributed generation sector caused by their appetite of supply and demand of this model.

During 2019 and 2020, LAB Mexico will continue to consolidate and expand its agenda. It is expected to be a mechanism for the efforts of institutions linked to climate finance to find a space to discuss, disseminate and execute all the ideas and knowledge that contribute to the fight against climate change. For more information about LAB Mexico you can visit the webpage: www.labmexico.com

• For more information about the project, contact the project team leader, Enrique Nieto, Specialist in Capital Markets and Financial Institutions: ENRIQUEN@iadb.org.
• For more information on innovative green finance operations through national development banks, see www.greenfinancelac.org