How Mexican boards of directors can prioritise climate governance
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How Mexican boards of directors can prioritise climate governance

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Yves Hayaux du Tilly, Héctor Arangua and Ana Paula Telleria of Nader Hayaux & Goebel suggest why it is imperative that Mexican companies incorporate ESG criteria into their corporate governance

We can all observe the effects that the climate emergency has in the environment: heat waves, loss of glaciers, rising sea levels, floods, draught, and recurrent natural disasters now form part of our daily lives.

We were warned a long time ago of the irreversible effects that climate change would have in the environment and we are now living the consequences of our own man-made disaster.

However, it was not until recently that the central banks and hence, the financial and business community understood that climate change constitutes a financial and systemic risk. According to Swiss Re, by 2050, climate change will reduce global wealth by 10%. This will signify a global loss of approximately $23 trillion.

Therefore, achieving the targets set in the Paris Agreement and limiting the average global temperature increase to less than 1.5 degrees Celsius above pre-industrial levels is fundamental to avoid such financial and systemic risk.

Among others, these reasons are conducive to changes in the manner in which business are conducted to adapt and find new manners to achieve the purposes of the organisation under sustainable standards. A new stakeholder capitalism has gained traction in the last years. This new model expands the company’s purpose to not only benefit its shareholders by maximising profits but also to expand such benefits to all the stakeholders, which requires to incorporate environmental, social and governance (ESG) criteria.

In order to transition to sustainable business models, companies may adopt the principles of climate governance to implement strategies that take the climate action to the boards to manage the risks of the climate emergency and take advantage of the opportunities that the shift to a sustainable model implies by achieving profitability margins while at the same time taking care of planet and people.

The role of directors

A director has a fiduciary duty to the company. Its two core duties are the duty of loyalty and the duty of diligence. In order to fulfil such duties, a director must take all necessary actions to avoid any foreseeable harm. It is evident that climate change constitutes a real and foreseeable harm, and therefore, to fulfil its fiduciary duties, directors must understand the climate emergency, the risks and potential harm it will inflict to the business and develop an adequate risk management strategy to mitigate any such risks and transition to a sustainable model of business incorporating efficient climate governance in the company.

The Mexican legal framework establishes different regulations for a director’s duties and liabilities depending on whether a company is private, listed or prudentially regulated.

“The evident dangers and risks of climate change have had an effect in the Mexican stock market.”

The Corporations Law (Ley General de Sociedades Mercantiles) regulates the corporate governance for private non-regulated companies. Pursuant to such law, a director’s liabilities are threefold, as he or she is liable for any breach of his or her obligations: (i) under the company’s by-laws; (ii) under applicable laws and regulations; and (iii) inherently stemming from his or her position as director.

Pursuant to Article 142 of the Corporations Law, directors are ‘mandatarios’ of the company. Under the concept of mandato, an agency relationship entailing particular responsibilities between the directors and the shareholders is established.

The legal concept of a mandatario in commercial law is regulated by the Third Title of the Commercial Code under the concept of ‘comisión mercantil’. Pursuant to Articles 286 and 287 of the Commercial Code, a comisionista must follow the instructions of its principal; in the event that there are no express instructions, the comisionista must consult with the principal, and if that is not possible, the comisionista “…shall act prudently, taking care of the business as if it was his own”. The duties of a director entail a personal responsibility and demand utmost due care.

Mexican courts have issued persuasive (non-binding) precedents (tesis aislada) that provide guidance on what may be interpreted to be the obligations inherently stemming from the position of directors. The precedents provide a test to confirm if the directors have complied with their fiduciary duties.

Accordingly, it shall be deemed that directors are in compliance with their fiduciary duties (i) if they are following and complying the instructions expressly given to them, (ii) if they have no express instructions, then they shall act based on proper advice and consultations, and (iii) in case there are no express instructions and it is not possible for them to act under proper advice and consultations, then they must act prudently and with utmost due care, considering the purpose and business of the company.

The board of directors is ultimately accountable to the shareholders or partners and such are entitled to demand compensation for damages from a director caused by breach of his or her duties.

Although Mexican law does not provide for objective parameters regarding the scope of fiduciary duties, we can infer that, since scientific research and evidence have clearly established the irreversible effects and risks climate change poses, if directors do not take into account climate change in their day-to-day decisions they are, in fact, incurring in breach of their fiduciary duties, and they may be held accountable for any negative effect climate change and damages or losses caused as a consequence thereof. A director would be held liable once the indirect effects of climate change start manifesting in the operations, finance and profitability of the company.

The Stock Market Law (Ley del Mercado de Valores) regulates the corporate governance of listed companies and defines the duty of diligence and the duty of loyalty of their directors. The scope of the duty of diligence and the duty of loyalty may be used to construe the scope and extent of the obligation of directors to act prudently and with utmost due care, as implied duties of directors.

The duty of diligence requires that the director: (i) acts in good faith and in the best interests of the company; (ii) is duly qualified, prepared and informed regarding all those aspects that are relevant to the correct operation of the company; and (iii) uses the resources and organisation of the company to achieve the greatest possible efficiency in its operation and management of financial risks.

The duty of loyalty requires that the director considers the best interests of the company first at all times.

Directors must present an annual financial report to shareholders. Such an annual report must include the financial statements and information pursuant to the financial state of the company. A director must provide, annually, the following information to its shareholders or partners: (i) the general state of the company, the implemented main policies, and key projects; (ii) the accounting standards used to prepare the financial information; (iii) the updated finances; (iv) the changes of the general finances and assets of the company and; (iv) notes or clarifications regarding the provided information.

Since the risks of climate change are material to the business and purpose of a company, we are of the opinion that all potential climate risks should be disclosed to the shareholders or partners of a company in the annual report.

In the case of public companies, the Securities Market Law also requires that the directors disclose to the general public all material information or events. Climate-related risks can be considered to be material events, and in such cases, the directors must disclose them. Not disclosing or making misstatements regarding material events may give rise to financial and even criminal sanctions.

“It is imperative that Mexican companies start acting based on their own risk analysis and projected scenarios; they must adopt climate resilience measures and disclose climate change information.”

The evident dangers and risks of climate change have had an effect in the Mexican stock market. In recent years, the disclosure of ESG information and the adherence to the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the standards of Sustainability Accounting Standards Board (SASB) have been widely promoted. However, to the date hereof, the recommendations of the TCFD, the standards of the SASB, and other climate or ESG disclosure standards are voluntary.

The regulation of the corporate governance of regulated entities depends on the applicable law of the respective entity. The general fiduciary duties of a director are applicable to regulated companies, with regards to its specific regulation. Mexican legal framework, as of this date, does not provide an explicit regulation regarding the obligations for financial entities or their directors to take into account environmental risks, with one exception – as of January 1 2022, private pension funds (Administradoras de Fondos Para el Retiro), Mexico’s most relevant institutional investors, shall be subject to a requirement to assess the ESG factors when evaluating their investments.

In case of a director’s breach of duties which result in financial damage to the company, only the shareholders or partners are entitled to demand compensation.

Notably, we can find the following relevant legal provisions applicable to the actions of directors as they pertain to climate change action:

  • Article 25 of the Mexican Constitution (Constitución Política de los Estados Unidos Mexicanos) provides that “The public, social and private sectors shall concur, with social responsibility, to the national economic development (…). Under the guidelines of social fairness, productivity and sustainability, the public and private sector companies will be promoted and supported, subject to the procedures dictated by public interest and use, in overall benefit, of the productive resources, taking care of its conservation and the environment.”

  • Article 24 of the Environmental Responsibility Federal Law (Ley Federal de Responsabilidad Ambiental) provides that the companies are liable for any environmental damage caused by their managers, officers, directors and employees and any staff with control over the operations of the company if they omit or act within their authority, representing the company or when they order or agree on actions that damage the environment.

Achieving climate goals

It is imperative that Mexican companies start acting based on their own risk analysis and projected scenarios; they must adopt climate resilience measures and disclose climate change information in order to mitigate the effects of climate change and thereby prevent potential financial damages and liabilities.

In order to achieve the above-mentioned, the board of directors of the company must, at the very least:

  • Expressly establish the board of directors is responsible for identifying climate change risks and opportunities, in order to achieve such, they must appoint a team of experts that will report directly to their CEO and board of directors;

  • Include in their agenda the development of a climate transition roadmap to 2050 with transparent carbon neutrality and reduction targets, including clear interim targets to 2030 and 2040, and a current rolling multi-year strategic plan, entailing a periodic reporting to the board of directors;

  • Delegate to the appropriate committee(s) such as risk, audit, legal and governance, scenarios/strategy, nominations/remuneration, or sustainability/corporate responsibility, the task of translating the long-term strategy into a clear decision-making process policy for each aspect that is relevant to each committee to their appropriate committee(s); and

  • Discuss with their disclosure counsel, in order to develop an external engagement and communications plan.

The goal is, or at the very least, should be, that climate governance becomes an intrinsic part of corporate governance in all Mexican companies. In this sense, the impact of private sector policies and leadership cannot be overstated – Mexican leading companies should set an example and take important steps towards slowing down climate change, and others will follow, if for no other reason than to comply with their fiduciary duty to their stakeholders.


Click here to read all the chapters from IFLR's ESG Americas Report 2021 



Yves Hayaux du Tilly


Nader Hayaux & Goebel

T: +52 55 4170 3003


Yves Hayaux du Tilly is a partner at Nader Hayaux & Goebel. He specialises in financing, M&A, and corporate law and is widely recognised as one of Mexico’s leading insurance and reinsurance experts.

Yves advises multinational clients and foreign investors in financing transactions, M&A, and other operations in Mexico and Latin America. He also regularly handles high-end transactions for leading insurance sector clients. He heads the firm’s London office, advising insurance companies, law firms and other leading international corporations and multinationals in their transactions and business involving Mexico and Latin America. He also leads the firm’s (re)insurance practice and the sustainable/ESG transition working group.

Yves is a graduate of Panamerican University. He was the founder of the Mexican Chamber of Commerce in Great Britain and has acted as its chairman since 2010.


Héctor Arangua


Nader Hayaux & Goebel

T: +52 55 4170 3022


Héctor Arangua is a partner at Nader Hayaux & Goebel. He specialises in capital markets, structured finance, private equity and M&A. He is an expert in securities and regularly advises both private and public companies on issuances in the local market and abroad.

Héctor’s structured finance practice is focused on providing advice to lenders on structuring complex bankruptcy-remote payment structures. He regularly advices on M&A transactions and has also developed expertise in the venture capital and private equity sector, in which he has continuously advised on fund formation and on investment and divestment matters. He is a member of the firm’s working group for a sustainable/ESG transition to a circular economy and generally advises regarding such matters within his practice areas.

Héctor obtained his LLM from the University of Michigan Law School, having graduated as a lawyer from Instituto Tecnológico Autónomo de México.


Ana Paula Telleria


Nader Hayaux & Goebel

T: +52 55 4170 3033


Ana Paula Telleria is a partner at Nader Hayaux & Goebel. Her practice focuses mainly on securities and capital markets, with significant expertise in secured transactions, including joint ventures, M&A and corporate-related matters. She is regularly involved in cross-border transactions in connection with the structuring, development and financing of projects in Mexico.

Ana Paula also specialises in real estate finance and investment. She has a strong background in relevant real estate transactions including business, commercial, industrial and residential developments, tourism and leisure projects (hotels, time-share regimes and mixed-use developments). She represents national and international sponsors, banks and financial institutions, global real estate investors and insurance companies, among others. She is a member of the firm’s working group for a sustainable/ESG transition to a circular economy and generally advises regarding such matters within her practice areas.

Ana Paula is a graduate from Panamerican University and has a LLM from New York University School of Law.

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