Within the framework of the cooperation between the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and the Banking Association of Mexico (ABM), a reporting framework that identifies the flows of green financing in Mexico for the taxonomy of green finance is being developed.
The reporting framework is the mechanism that concentrates the information from the use of the taxonomy in order to determine which financing can be considered green in the operation of a bank or other financial institution; this allows investment flows to be monitored and results to be reported.
The proposed reporting framework serves to:
- Homogeneously report the financing granted by financial institutions under the criteria and specific characteristics determined by the taxonomy.
- Create a level playing field between Mexican banks, so that there is an approved reporting method, with parameters that allow comparable data to be obtained.
- Identify and characterize the portfolios of products and green instruments that have been contracted and/or are in the portfolio:
- By sector/branch/economic activity.
- By financial instrument.
- By degree of greening.
The reporting framework proposal was based on a review of other international green financing reporting practices, such as the one used to report green financing granted through loans by banks in China , and the reporting framework of the Principles of Responsible Banking .
Thus, the reporting framework that was proposed for the green finance taxonomy system in Mexico is composed of the following elements:
- Reporting format. Format to report green financing flows from financial institutions.
- Validation protocol. Format to verify the proper application of “green” criteria agreed in the taxonomy and avoid counting the green financing shared with other banks twice.
- Practical Guide. Document with the descriptions of the two previous formats and instructions to fill them out.
In February 2020, a first version of the reporting framework was tested in the first pilot-reporting exercise for green finance flows carried out by Mexican banks.
The reporting framework is important to clearly and concisely communicate the progress of green finance in the country, monitor it and promote its improvement.