Author: IKI Alliance

Co-benefits have become a tool to promote a fair energy transition, since they consider that climate mitigation and adaptation strategies can be designed to have a positive impact beyond the avoided greenhouse gas (GHG) emissions. In other words, additional results can be triggered in social, economic and environmental terms at both the national and sub-national levels.

In order to discuss the global trends that facilitate the fight against climate change at the subnational level, the second virtual dialogue “The Energy Transition and its Social, Economic and Environmental Co-benefits: A Look from the Local” was held in the framework of the “Virtual Regional Forum on Trends in the Energy Transition in the Face of Climate Change in the World: Actions at the Subnational Level,” organized by the Ministry of the Environment, Sustainable Development and Territorial Planning (SMADSOT) of the state of Puebla with the accompaniment of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.

Welcoming words were given by Beatriz Manrique, Head of SMADSOT; Gemma Santana, General Director of the 2030 Agenda in Mexico; Dr. Marco Antonio Heredia, Director General of the General Directorate of Policies for Climate Change at SEMARNAT; and Jonas Russbild, Director of the Project “Enhancing the Coherence of Climate and Energy Policies in Mexico” (CONECC) of GIZ. They underlined the importance of meeting the current needs of the population through public policy instruments that have a social justice approach and that take into consideration an environmental agenda and sustainable development.

In a second part, the discussion was oriented to a technical perspective, in which experts participated in the main co-benefits of energy transition processes at a local level.

Dr. Luis Gerardo Ruiz, General Coordinator of Pollution and Environmental Health of the National Institute of Ecology and Climate Change (INECC) specified that poverty and inequality can be addressed with a healthy environment, and emphasized the need to generate common narratives to reap these multiple benefits. Meanwhile, Héctor Rodríguez, Former Coordinator of the IKI COBENEFITS Mexico project at IASS Potsdam, explained that the narrative focused strictly on reducing emissions has fallen short, since multidisciplinary strategies explore the different scenarios that can be obtained by accelerating the energy transition.

Mirelle Segovia, Head of the Renewable and Industrial Energies Headquarters of the SEFOET in Yucatan, asserted that studying co-benefits allows valuable information to be available to direct efforts, as well as providing knowledge regarding the real potential that each state has in different lines of action –highlighting the experience of Yucatan in the quantification of co-benefits. Finally, Santiago Creuheras, SMADSOT’s Undersecretary of Environmental Management and Energy Sustainability commented that from a budgetary point of view, both the coordinated work between ministries and the search for public-private partnerships are key to promoting the investments necessary for the energy transition.

This event is part of a series of efforts by the government of the state of Puebla, providing a space for different actors to promote reflection on local climate action. Several GIZ programs are participating, including the Mexico-Germany Climate Change Alliance programs, the CONECC project, the support program for the Energy Transition in Mexico (TrEM) and the FELICITY project. This second dialogue, held on January 22, 2021, reached an audience of around 130 people.

Within the framework of the MGI project, the on-site assessment of the city is a key activity to acquire deeper and more specific knowledge about the performance of Saltillo in the selected work sectors: water, mobility and energy. This evaluation allows the elaboration of the roadmap with relevant projects that bet on the sustainable development of the city. Due to travel restrictions imposed by Covid-19, the on-site assessment format was adapted to be developed digitally.

Representative photo of the project. Morgenstadt Project Communications team.

Between September and November 2020, approximately 40 online interviews were conducted with local experts from the public, private and academic sectors. Online workshops were also organized, encouraging reflection and discussion on the information collected in the interviews. The planning and execution of the digital evaluation of Saltillo was possible thanks to the joint work of the University of Stuttgart and the Fraunhofer Institute in Germany, as well as key partners in Mexico such as the Municipal Planning Institute of Saltillo (IMPLAN) and the Monterrey Institute of Technology and Higher Education (ITESM).

The activities carried out during the digital evaluation made it possible to confirm hypotheses of the preliminary research stage of the project. Likewise, new and valuable knowledge was acquired about the challenges and opportunities of Saltillo in the study sectors, and fields with potential for sustainable development and possible reduction of CO2 emissions in the city were identified.

Photo of the inter-sectoral online workshop held in December 2020. Catalina Díaz

At the end of all the interviews, an inter-sectoral online workshop was held in December 2020 with the project’s team of experts in Germany and Mexico. The main objective was to review and discuss the project ideas generated in each sector and identify possible synergies and interrelationships between them. Among the next activities are the scientific assessment and development of project ideas, as well as the execution of a pilot project in Saltillo in the final stage of the MGI.

If you are interested in following the MGI project and the City Lab Saltillo more closely, we invite you to review our LinkedIn and Facebook pages where you will find relevant updates and news from the project.

The development of sustainable energy projects at the local level is key to promoting the energy transition and climate protection. Furthermore, its correct implementation will maximize the positive effects by unleashing additional benefits within the environmental, social and economic pillars.

The GIZ, through the Enhancing the Coherence of Climate and Energy Policies in Mexico (CONECC) project, in coordination with the Ministry of Environment and Natural Resources (SEMARNAT), held a presentation meeting to establish the preliminary bases of the pilot program for the quantification of co-benefits, one of the main milestones of the second phase of the Co-Benefits México project. The objective is to provide tools to public policy makers in order to incorporate the co-benefits of sustainable energy into decision-making processes, by quantifying its positive results and thus creating a greater socio-economic impact.

Jonas Russbild, Director of the CONECC Project, shared a welcome message for the selected projects and took the opportunity to give an introduction on the accompaniment that GIZ provides in Mexico as a catalyst for national efforts for climate action. In turn, Martín Aguilar, on behalf of SEMARNAT, stressed that this is a great opportunity to make visible and account for the potential benefits derived from strengthening capacities and actions to mitigate climate change.

The aim of this meeting was to share the work mechanics and scope of this pilot program with the six projects selected from a public call. The participating projects are located in the states of Tamaulipas, Yucatán, Hidalgo, Guanajuato and Coahuila; covering, on the one hand, issues such as community renewable energy generation, as well as small and large-scale; and, on the other hand, energy efficiency measures in buildings and public services. More than 35 participants from the public and non-governmental sector from different state and national organizations participated in the meeting.

Finally, it should be noted that this pilot program for the quantification of co-benefits will make it possible to identify characteristics and needs of renewable energy and energy efficiency projects, from which a work plan will be integrated and a tool for quantification of co-benefits will be developed – benefits that allow both SEMARNAT and other actors to quantify the positive impacts derived from the implementation of climate protection projects. The pilot program is scheduled to take place during the period of February and August 2021.

In the framework of the virtual forum “Financing for a Green and Inclusive Recovery” that took place on November 18 and 19, 2020, the project “Preparation of an Emissions Trading System in Mexico (SiCEM) organized the session “Integrating Transitional Climate Risks: The Case of the Emissions Trading System”.

The aim of the session was to learn about the way in which the financial and productive sectors assess and incorporate both climate transition risks and opportunities in their strategic planning, corporate decision-making and financial disclosure related to climate, as well as the possible role of the Emissions Trading System (ETS) in these processes. Distinguished experts participated: Alan Gómez (Citibanamex Vice President of Sustainability) as moderator, as well as Alba Aguilar (Director of New Markets in the Mexican Stock Exchange) and José Ramón Ardavín (Executive Director of the Private Sector Studies Commission for Sustainable Development, CESPEDES).

It was highlighted that the recognition of transition risks in Mexico has promoted important changes. These changes include a financial community that is now convinced about the importance of understanding, evaluating and integrating risks in their strategies. In addition, the need for information, standards and clear business rules was identified to scale the green financing market. Finally, in recent years, green financial products have emerged and been labeled with environmental, social and government criteria. However, it was highlighted that the amount of green financing is still incipient.

The launch of the ETS is essential to unleash climate finance and accelerate the development of the green product market. During the session, the importance that companies should give to the ETS was mentioned, since it is an important instrument for integrating climate change into their business strategies and reducing climate financial risks. This is because it allows them to specify emission reduction goals and facilitate the management of the carbon budget, facilitate the development of mitigation projects and promote green investment. It also allows them to promote resilient business models, adapt to changes in the market and continue to be highly competitive in the future.

To access the recording of the session, click here (in Spanish).

Invitation to the Virtual Forum “Financing for a Green and Inclusive Recovery”. GIZ

During the 11 sessions that addressed the topic of preparing successful investment projects (PreP), 2,149 attendees participated, covering 18 countries and 674 people enrolled in the online course, with 352 women participating.

PreP webinar series. FELICITY México and CONVERSA-CONGREXPO.

The sessions were held from September 2 to November 11, 2020, in a joint effort between the Global FELICITY Program and various programs related to climate finance and low-carbon projects in cities where GIZ participates –as well as government agencies, and national, regional and international organizations. The webinar series was held with the purpose of promoting the realization of sustainable and resilient projects, as well as closing the gap between low-carbon urban infrastructure projects and the financing required for their implementation.

Inauguration PreP. FELICITY Mexico

In addition to the webinars, the PreP includes an online course that complements the information shared by the specialists. Also, those who complete the course obtain a certificate.

This online course remains open and continues to allow enrollment of new users interested in learning more about low carbon project preparation. In addition, it is completely free. You just have to register at: https://www.ccfla-prep.org/. For more information, contact Miguel Fernández: miguel.fernandez@giz.de.

Final PreP infographic. CONVERSA – CONGREXPO. Participants by countries PreP. CONVERSA – CONGREXPO.
Participants by country PreP. CONVERSA – CONGREXPO.
Free Online PreP Course: PreP – The ABCs of Preparing Successful Investment Projects (ccfla-prep.org). FELICITY Mexico.

Technological innovation is a way to promote local climate action and determined processes of green economic reactivation. Since 2019, the Secretariat for Sustainable Development of the state of Querétaro (SEDESU) in coordination with the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH through the project Enhancing the Coherence of Climate and Energy Policies in Mexico (CONECC) have worked on the creation of an innovation Hub, now named HUBIQ, in the field of renewable energy and energy efficiency. HUBIQ seeks to develop competencies and capacities in startups, ventures, and other actors that seek to promote technological innovations for the deployment of sustainable energy in the state, through the strengthening of business models that incorporate the social, economic and environmental effects of these technologies. To achieve this, the aim is to promote a linkage platform based on the triple helix cooperation model —made up of government, companies and academia— constituting the core of the Hub’s value proposition.

 

Technological Innovation Hub in the field of sustainable energy for climate action in the state of Querétaro. UB IQ. GIZ / CONECC / Elaboración Laguna Centro.

The event featured messages from the State Secretary for Sustainable Development, Marco A. del Prete Tecero; the President of the Energy Cluster, Patrice Rimond; the Director of the CONECC project, Jonas Russbild and Natalia Nila Olmedo, Director of the Reconfigurable Control Research Laboratory (LiCore). It was stated that HUBIQ would promote technological innovation and synergies with various actors to seek innovative solutions to climate change and strengthen the local energy ecosystem.

The study “Towards an Optimal Concept for the Implementation of a Technological Innovation Hub in Renewable Energies and Energy Efficiency for Climate Action in Querétaro” was also presented, in which the analysis of alternatives and viability was carried out, which led to the implementation of the Hub in the state of Querétaro. The study includes a documentary analysis and diagnosis of the local electricity market and the local innovation ecosystem, and a set of alternatives that led to an action plan for the creation of the platform. Furthermore, the process adopted a multi-stakeholder and highly participatory approach, including more than 90 local stakeholders from the innovation sector.

Dersu Figueroa Zaráte, HUBIQ coordinator, presented the activities and objectives of the project, along with the areas of specialization and its offer of services, which includes: strengthening human capital capacities through training and technical training; business relations, and services for the maturation and commercialization of technologies. Natalia Nila, Director of LiCore, presented the Technological Innovation Project Acceleration Program, which is financed by the Support for the Implementation of the Energy Transition in Mexico (TrEM) program. Through this program, the first generation of HUBIQ projects and other invited MSMEs from the state energy sector have strengthened their technological innovation capabilities and promoted a green economic reactivation in the face of the crisis caused by the SARS-CoV-2 virus.

Kick off of HUBIQ activities by Dersu Figueroa Zaráte, HUBIQ Coordinator, Marco A. del Prete Tercero, Secretary of SEDESU and Jonas Russbild, Director of the CONECC project. CONECC / GIZ

HUBIQ’s next milestone will be its formation as a Civil Association (A.C.). In addition, it is expected that the official start of HUBIQ will help inspire other states in the Mexican Republic to promote the energy transition and local climate action through Innovation Hubs.

The Hub’s experience allows us to identify the potential of technological innovation to achieve Mexico’s climate goals, with an emphasis on disruptive approaches applied to energy transition processes and recognizing the contribution of the sub-national level; this translates into the strengthening of ecosystems of innovation and strengthening of the links that allow the sustainability and impact of innovation in favor of sustainable development.

To see the live recording of the official start, click here (in Spanish).

Official launch of the Technological Innovation Hub in terms of sustainable energy for climate action in the State of Querétaro. GIZ / CONECC / Elaboración Laguna Centro

For more information, you can consult and download the study in PDF as well as the presentations of the event speakers.

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Within the framework of the cooperation between the Mexican-German Climate Change Alliance of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and the Banking Association of Mexico (ABM), the development of a taxonomy of green finance for Mexican banks is being promoted.

Taxonomies are useful tools for sustainable finance since they provide certainty, clarity and transparency to the investors in the market and reduce the risk of bad practices such as Greenwashing.

For Mexico, a green finance taxonomy with a broad scientific base and support from regulatory entities such as the European taxonomy would be a tool for facilitating a green recovery and increased sustainability in the national economy.

Thus, it is necessary to think of the Mexican taxonomy as something more than a list of green activities; it must be understood as a system composed of various elements:

  • Principles
  • Criteria
  • Methodologies
  • Operational and governance mechanisms
  • Reporting framework
  • Diffusion mechanisms

Although the taxonomic system does not provide economic incentives to disregard investments that are not classified as green, it is a useful tool for investors who want to mitigate and manage financial transition and liability risks related to the climate, through the increase of green assets in their portfolios.

Likewise, environmental risks–particularly climate ones–pose a greater threat to the most vulnerable sectors of society due to their greater exposure to these types of risks. Therefore, by promoting sustainable investments, the green finance taxonomy contributes to a more equitable and fair society.

Finally, establishing a taxonomic system within the Mexican financial system will promote investments that respect the environment, attract investors interested in a portfolio with lower climate risks, stimulate compliance with national public policy objectives and international commitments. It will also make it possible to clearly identify green projects and activities that can attract investment as part of the post-COVID-19 recovery.

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.

In February 2020, the Banking Association of Mexico (ABM) and the Mexican-German Climate Change Alliance of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH promoted the first pilot exercise of a reporting framework for accounting for green financing.

This exercise had three main objectives:

  1. To identify the current situation of green financing in Mexican banks and to analyze financing directed towards green projects throughout 2018.
  2. To carry out a harmonized green financing accounting exercise under common and practical criteria.
  3. To check the current practices of gathering information and classifying green financing within banks.

For the exercise to be carried out, 11 activities were defined within six economic sectors in order to do the accounting of the financing.

The results indicated that more than half of the green financing was directed towards clean energy projects; the construction of certified sustainable buildings was in second place, and in third, sustainable agriculture projects, as shown in the following graph.

 

Total Green Financing in the Sector in 2018

 

Several lessons emerge from this exercise, including:

  1. More internal coordination is required between the areas involved.
  2. Current capacities must be strengthened to have more reporting capacities in the future.
  3. Ad hoc information systems would strengthen the taxonomy reporting process.
  4. The information gathering exercise should be carried out periodically for the reporting of green financing flows, allowing the green growth of the Mexican economy to be observed.
  5. It is recommendable to add more climatic and environmental sustainability criteria at a later date, such as the degree of transition towards a circular economy or ensuring that the fulfillment of any of the criteria would not significantly damage the achievement of others. This would allow progress to be made in harmonizing green financing in Mexico with the best international practices.

The development and operation of a green finance taxonomy in Mexico is on the horizon, as Mexican banks take concrete steps to operate more sustainably.

On November 18 and 19, 2020, the Green and Inclusive Financing Forum organized by GIZ Mexico took place, with the objective of presenting the actions that GIZ Mexico has and is currently carrying out, alongside implementing partners and public and private sector counterparts, in the field of sustainable financing. A space for dialogue was also generated between key actors on progress, trends, and possible synergies for the mobilization of financial resources that could facilitate a green and inclusive recovery, in a post-COVID-19 context.

Prior to the event, a media workshop was held with national media such as Excelsior, El Financiero, CNN Mexico, Grupo Imagen, AFP and El Universal, in order for them to cover the event.

Throughout 20 sessions, the forum had the participation of representatives from federal agencies such as the Office of the Presidency of the Republic, SHCP, SEMARNAT, CONANP, INECC and Banco de México, as well as from the private and financial sector; they applauded the opening of a space for a multi-actor and multi-sector conversation on this very relevant topic.

With the participation of a total of 54 speakers and nearly 500 people registered for the event, the virtual forum reached 1,869 participants through Facebook Live and YouTube. The event had a great national and international scope, with attendees from more than 20 Mexican States and an audience from countries such as the USA, Costa Rica, Ecuador, Peru and Sweden–as well as wide dissemination in national media.

During the two days of the forum, sustainable financing was approached from different perspectives:

  • The case of sustainable sovereign bonds issued by the Mexican and German governments.
  • Challenges for financing national climate change goals.
  • Taxonomy of green financing in Mexico.
  • Impact investments for socio-environmental ventures in protected areas.
  • Financing mechanisms for regenerative agriculture.
  • The role of subnational governments in the search for climate finance.
  • Transitional climate risks and the Emissions Trading System.
  • Coal price mechanisms.
  • Other sustainable, green and climate finance issues.

Take a look at the event’s official website to find all the available materials, including recorded sessions, presentations, infographics, profiles of all the speakers and more information about each session. On behalf of the organizing team, we thank those who participated and were able to join us.

Within the framework of the cooperation between the Mexican-German Climate Change Alliance of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and the Banking Association of Mexico (ABM), the development of a green finance taxonomy for Mexican banks is being promoted, through the design of a methodological proposal of the taxonomy system for financial institutions. Different criteria were considered to prioritize the sectors and choose the green economic activities within them that will make up the taxonomic system.

The methodology developed to prioritize green economic sectors was based on three components:

  1. Environmental impact: The economic sectors that could have a greater negative or positive contribution to environmental objectives were identified –particularly those that mitigate climate change, since this topic represents the niche with the greatest opportunities and interest from institutional investors.
  2. Investments: The economic sectors with the greatest investment potential were identified based on two factors: a) Economic sectors with the highest historical investment in the country, and b) Sectors with the highest flows of green financing internationally.
  3. Best practices: Different international practices were observed in the matter, especially the experience derived from the North American Development Bank (NADB https://www.nadb.org/es), due to its experience of more than 20 years of green financing in Mexico. Likewise, the green financing classification methodologies already used by some Mexican banks were reviewed.
Relationship between investments, environmental impact and best practices. Santiago Lorenzo

The analysis showed that the energy, transport and agriculture sectors should first be considered in the taxonomy of green finance in Mexico.

The Sustainable Finance Committee of the Financial Stability Council will be in charge of creating Sectorial Technical Groups (GTS) with experts on the evolution of their market and its environmental impacts, to generate the Technical Evaluation Criteria (CETs), emphasizing activities where greater investor interest and greening potential are expected. These will reflect the scientific evidence and will contain parameters, metrics, and thresholds to verify that the financing of these activities contributes to the fulfillment of Mexico’s environmental objectives, established in the national legal framework as well as international commitments

The Biodiversity and Sustainable Agrosilvopastoral Livestock Landscapes project, known as BioPaSOS, is being implemented in three Mexican states: Jalisco, Chiapas and Campeche. It has trained more than 1,200 producers on the importance and know-how of incorporating good livestock production practices, including the implementation of silvopastoral systems. Thanks to this work, there are currently cattle families practicing sustainable cattle production and conserving biodiversity on their ranches.

In the following video, Deutsche Welle shares the experience of several producers from Chiapas, who have worked with the BioPaSOS project and now recognize the value of simultaneously producing and conserving.

 

BioPaSOS has been running since 2017, in order to respond to the problem of traditional and extensive livestock farming. A development that has led to, among other things, habitat fragmentation and deforestation, contributing to the loss of biodiversity and ecosystem services. This further enhances the negative effects of climate change, affecting the productivity of ranches and negatively impacting the livelihoods of livestock families.

This project is implemented by CATIE (Tropical Agricultural Research and Higher Education Center), with the support of the Inter-American Institute for Cooperation on Agriculture (IICA), in coordination with the National Commission for the Knowledge and Use of Biodiversity (CONABIO) and the Ministry of Agriculture and Rural Development (AGRICULTURA), with funding from the International Climate Initiative (IKI) and alongside multiple local partners in their territories of intervention.