Mexico transition linker based on the 2026 framework

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This paper proposes a transition linker bond structure, based on Mexico’s decarbonisation targets, stated in a recently released sustainability financing framework.

Our analysis suggests that the target is relatively ambitious and the transition linker would could price approximately 3 basis points inside current secondaries, using the MEX €5.125% 05/2037 as a twin bond and with a multiple strike structure with up to +/-50bps coupon adjustments based on achieving transition targets.

Mexico’s investment grade rating, recurrent issuance in EUR, and carbon emissions reduction potential of currently more than 0.5 GtCO₂e opening up for very significant carbon emission negative delta, makes the country what we would deem a very strong candidate for transition linked financing.