Mexico, with the largest number of native Spanish speakers globally, is a cultural and economic cornerstone of the Americas. With an economy of $3.3 trillion in purchasing power parity GDP, foreign investors are flocking to Mexico for a whole host of reasons: from being the largest trade partner with the United States to hosting an increasing number of unicorns.
The Mexican diaspora is also partly to credit for investor interest. Over 38 million people of Mexican descent live in the US alone, and the diaspora provides over $60 billion in annual remittances. US-based investors have a familiarity with Mexico in ways that help them overcome the infamous “home bias” in investing.
Climate investors are also getting in on the action in Mexico. The government’s 2030 goal is to reduce GHG emissions by two-thirds, requiring $185 billion in investment across the real economy.
What are the best investment opportunities in Mexico, especially for cross-border investors?
Mexico, like many economies in the Global South, has a robust system of local banks, credit unions (cooperativas), and asset management firms that offer risk-adjusted products for the climate conscious investor. The 51 banks hold 12.7 trillion Mexican pesos (about $597 billion) in assets. Credit unions number 155, serve more than 9.4 million members, and contain assets of more than $13.7 billion.
Many Mexican financial institutions have signed on to sustainable finance initiatives, including the charter of the Global Alliance for Banking on Values, measuring and disclosing GHG emissions via the Partnership for Carbon Accounting Financials, and becoming B Corp Certified.
One of the simplest ways to enable and benefit from Mexico’s green transition is by opening up a savings account with one of these institutions.
Investors can also turn to Mexico’s fixed income market for bonds labelled as sustainable, green, and socially responsible. In 2023, over 45% of all Mexican bond issuances had an ESG label. Mexico became the first country in the world in 2020 to issue a Sovereign Sustainable Development Goals Bond, aligning debt financing with the U.N. SDGs (of which number 13 is climate action).
Mexican companies have also joined the sustainable bond bandwagon. For example, in 2023, bakery company Grupo Bimbo successfully issued a Sustainability-Linked Bond in the Mexican market, raising approximately $850 million, aimed at decreasing their Scope 3 carbon emissions. In the same year, industrial company Orbia successfully completed the first reopenings of its first and second notes issuances, for a total amount of MXN 10 billion (USD 547 million).
Mutual funds focused on sustainability have facilitated access to capital for climate solutions. A range of asset managers are expanding investment in Mexico with ESG-focused funds, including Actinver and Vanguard Mexico. The Climate Solutions Stocks open access database contains listed equity opportunities across Project Drawdown solutions for Mexican companies.
The capital markets in Mexico are less liquid than, say, Brazil, and many large Mexican companies choose to either remain private or go public on a US exchange.
For risk-tolerant investors, namely those who play in the venture capital space, Mexico has one of the most robust startup and VC ecosystems in the Americas. VC firms with a climate thesis in Mexico include ALLVP, Amplifica Capital, Regenera Ventures, Savia Ventures, Dalus Capital (host of the Latam Climate Innovation Summit), and Fundamental Venture Studio.
Access to climate startup investments in Mexico is currently almost exclusive to institutional investors, most of whom either represent private capital in Mexico or public financial institutions (such as DFIs) outside of Mexico. When I asked Dalus Capital’s Gabriel Estrada about the pathways for attracting more private cross-border VC into Mexican climate tech, his response was “networking is what solves this problem.” Knowledge of startup deals does happen through both informal and formal networks throughout the world. Estrada pointed to convenings such as FLII as an example of such networks for Mexican innovation.
Climate-smart
Mexico is shaping up as an attractive market for distributed renewable energy, EVs, and plant-based alternatives. Let’s have a look at the macro incentives and trends for some of Mexico’s booming climate solution sectors.
In October 2024, the Mexican government unveiled a plan to increase the share of renewable energy in Mexico’s power mix to 45% by 2030. Under the Mexican Income Tax Law, businesses can deduct 100% of the cost of machinery and equipment used for renewable energy generation or high-efficiency electricity cogeneration systems in a single fiscal year – as long as the assets remain operational for at least five consecutive years following the deduction.
And various sub-national governments in Mexico offer local tax incentives to encourage renewable energy. For example, Mexico City provides a 30% reduction in property tax, a 55% reduction in payroll tax, and an 80% reduction in the tax on real property acquisitions for businesses focused on renewable energy innovation and development.
Solar and wind energy are considered by many as safe bets in Mexico, while industrial geothermal remains in the exploratory phase. “There is over 4 gigawatts of distributed solar in Mexico and the investment case is clear,” explained Emiliano Detta, head of Mexico operations for KfW, the German development bank.
Retail and institutional investors alike can easily access the solar opportunities. B Corp Red Girasol, for example, provides investors with access to solar opportunities with a 13% return as of this writing. Mexico also needs 8.4 gigawatts of energy storage capacity by 2038 to ensure grid stability and facilitate renewable integration, creating investment opportunities for battery and other energy storage technology.
Mexico’s agri-food sector continues to grow, accounting for 9% of Mexico’s total exports in 2024. Top exports include both climate-friendly products (such as avocados, berries, and tomatoes) and climate-unfriendly ones (such as beef). While the domestic alternative meat market may be smaller than others in the Americas, Mexico boasts brands such as Benji and has its own domestically-focused insect protein market, given the valued tradition of consuming crickets and grasshoppers in parts of the country.
The broader land-use sector is also turning to regenerative practices. Some VC firms are leveraging the companies that are built on top of Mexico’s communal land system, called ejidos. Ejidos represent more than half of the agricultural land in Mexico, and while depository institutions have difficulty providing finance to them, there are profitable pathways to backing companies leveraging products grown on ejidos. Stevie Smyth of SVX MX and Regenera Ventures is betting on such companies, including companies providing important biodiversity functions by growing many different kinds of corn, and others that are monetizing nature through ecotourism.
Mexico is the world’s seventh-largest vehicle manufacturer in the world, with 3.5 million vehicles produced annually, 88% of which are exported. The EV market penetration is minimal, and by influence, that is true of most of the American (referring to the continent) market. Electric and hybrid models have been making gains, but the Mexican government’s recent tariff of 50% on Chinese vehicles, including EVs, is not expected to help the situation. Nevertheless, the ground is fertile for investing in domestically produced electric mobility products in Mexico. Taruk is the first all-electric bus completely designed and manufactured in Mexico.
Mexico offers a full suite of investable opportunities across the climate solutions space. From the risk-tolerant looking for the next unicorn, to the risk-averse that want steady and stable returns, investors will find a rich landscape for a diversified climate portfolio.
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Marilyn Waite is a contributing editor to ImpactAlpha.
Waite runs Capital for Sustainability, or C4S, an initiative focused on mobilizing private capital for low- and middle-income countries. She previously led the Climate Finance Fund, now fully deployed.
The Climate Finance Fund supports ImpactAlpha’s global climate coverage.
