I am often asked who will be affected by global warming, the answer practically solves itself: everyone.

It is a serious global problem and every country on the planet is and will continue to experience negative environmental effects until they adopt the necessary measures to change course. Central America has long been considered a region highly vulnerable to climate change. Mexico, due to its particular geographic location (located between two oceans), as well as its latitude and topography, is significantly exposed to extreme weather conditions, such as droughts and floods. These issues were just one of many discussed during the United Nations Climate Change Conference, COP26.

One of the biggest problems facing the country regarding climate change is the carbon emissions produced individually by its residents and collectively by companies that have yet to align with sustainable practices that respect biodiversity and conservation.

Despite the definitive closure of more than 1 million companies in Mexico due to the pandemic, the importance of SMEs to the Mexican economy remains vital. According to data from the National Institute of Statistics and Geography, they generate 72% of employment and more than 50% of Mexico’s GDP. For this reason, the path to sustainability for SMEs is essential. The key to making this transformation possible is understanding that sustainability and profitability can go hand in hand and support a resilient economy.

It may seem simple in theory, but as we know, it is not so in practice. We personally live it too. How many of us would like to use less plastic or just eat organically produced food, but the cost and availability of accessible alternatives often make it impossible. When we are faced with the economic issue, the options are drastically reduced due to budget reasons. Small and medium-sized companies suffer these same difficulties on a larger scale when it comes to integrating sustainable practices. Given the cost involved in this transformation, the liquidity they normally have is not enough.

Therefore, one of the greatest challenges that SMEs face in order to be more sustainable is access to financing from specialized mechanisms or practices as well as adequate advice to develop new business strategies. On the other hand, SMEs are a large part of the Mexican economy – it could be said that their backbone – so it is imperative that they be more sustainable. However, the big problem is that most banking institutions are not yet in a position to provide them with financial support. That is why initiatives such as the eco.business Fund are crucial for there to be a transcendent change and the importance of green finance to be more notorious.

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The mission of the eco.business Fund is to promote green finance. Investments focused on the environment have increased considerably in recent years, and in the aftermath of the Covid-19 pandemic, funding opportunities are more than welcome. After the decline of the Mexican economy in 2020, the recovery prospects for 2021 were estimated at between 4 and 5% GDP growth, with important opportunities for the manufacturing and agricultural sectors linked to the United States export market. The eco.business Fund’s investments of more than $ 80 million to non-bank financial institutions (NBFIs) in Mexico also contribute to a green recovery in the country.

The investment fund was started in 2014 by Germany’s KfW Development Bank, Conservation International Finance in Motion, and financial support from the German Federal Ministry for Economic Cooperation and Development. The Eco.business Fund is committed to promoting business and consumer practices that contribute to the conservation of biodiversity, the sustainable use of natural resources, and the mitigation and adaptation to climate change.

Over time, it has become clear that capital markets can play a critical role in financing conservation and long-term sustainability. That is why we are passionate about increasing the commitment of stakeholders in the financial sector to become agents of change to drive a green transformation.

For example, Mexico City-based Mercader Financial, which received a $ 15 million guaranteed loan from the fund, works with SMEs in the manufacturing, services and agribusiness sectors. By partnering with Mercader, the financing will help generate environmental impacts since it is possible to have access to efficient equipment for food processing, protected agriculture or greenhouses, as well as other technological solutions in the grain and fruit value chains. On the other hand, financing also contributes to the economic reactivation of Mexico and the much-needed re-generation of sources of employment.

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An investment in protected agriculture alone can make a significant difference in reducing the carbon footprint of the agricultural sector. For example, increasing productivity while reducing land use pressure, reducing water use by up to two-thirds, and reducing fertilizer and pesticide use by 40 and 67%, respectively, are all factors. critical to improving the climate resilience of Mexican agriculture. Thanks to the fund’s investment, Mercader has expanded access to green financing to clients who would like to implement these changes, but do not have access to long-term financing.

The strategy has already been implemented in other countries, ensuring a targeted impact approach, leveraging strategic alliances, and establishing a strong investor base to promote financing for conservation.

Using a solid theory of change to measure the impact generated, the fund published in its latest report that, during the period of December 2020, both its activities and its partners have contributed to saving 4.5 million cubic meters of water through the financing water with efficient technologies, as well as avoiding the use of 37,000 liters of herbicide, among other achievements.

Making conservation funding mainstream cannot happen in a vacuum. Only the collective action of all players in the financial ecosystem, from investors in the fund to local financial institutions or corporate players along the value chain, can truly address climate change.

Finally, I want to emphasize that we are playing a small but important role here in Mexico and as a background we have no intention of stopping. Our recent partnerships with Mercader Financial, Unifin and Mega are just the beginning, and we look forward to announcing many more in the future, both here and abroad.

* The author is president of the eco.business Fund.


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