MEXICO Law and Practice Contributed by: Federico Ruanova Guinea and Isabella Guzman, Baker McKenzie
16.4 Green Finance There are no legally binding arrangements in place yet for green financing in Mexico. In 2015, the members of the Mexican Banking Association signed a volun- tary Sustainability Protocol that, among other things, sought to institutionalise a commitment towards sus- tainable development. The Protocol comprised five principles: • a commitment to establish an internal sustainability policy; • management of environmental and social risks in investment projects and the granting of credit; • promote financing of sustainable projects; • a corporate policy that encompasses sustainability principles in internal operations; and • follow-up to sustainable policies implemented by the banking sector. When purchasing or leasing land, environmental due diligence is conducted on M&A, finance and property transactions in order to determine whether there may be any type of remediation liability, because the Waste Law requires that the parties involved determine who will be responsible for remediation if a site being pur- chased is contaminated. It is also customary to conduct a permit review in order to determine whether the target company is in compliance with relevant permitting and compliance requirements and if it has incurred any type of envi- ronmental liability. 17. Transactions 17.1 Environmental Due Diligence A buyer may incur environmental liability for historic environmental damage because under federal law an owner or lessee of a contaminated site will be jointly liable for its remediation, regardless of fault. This is why it is important to conduct proper due diligence prior to purchasing a site and, in some instances, carry out a site characterisation study that will help determine if remediation may be warranted.
17.2 Disclosure of Environmental Information Laws do not require a seller to disclose any environ- mental information to a purchaser. This is more a con- tractual requirement. However, in the case of soil con- tamination, if a seller fails to disclose to a buyer the fact that a site was contaminated prior to its transfer, it will retain environmental liability for historic envi- ronmental damage if the buyer discovers that the site was contaminated and that the contamination was generated prior to the transfer. This is according to the Waste Regulations. Likewise, in the absence of an express agreement to determine which party is liable for remediation of a polluted site, the seller retains liability for such remediation. In the interest of environmental due diligence, a pur- chaser may investigate to determine if a site may be contaminated, given that owners or occupiers have remediation liability regardless of when contamination occurred. Typically, the purchaser requests the execu- tion of a site characterisation study. In addition, a per- mitting review should also be conducted, in order to determine whether the company in question is legally authorised to operate and whether the permits are in full force and effect. Warranties, indemnities or other provisions that may be given during a share or assets sale mainly deal with remediation obligations if a site being sold or trans- ferred is contaminated. It is common for parties to include language on who will be contractually required to undertake remediation or who will indemnify and free the other party from any liability associated with soil or groundwater contamination. There may also be warranties and indemnities in place if a purchased site is cited or shut down for causing environmental damage that was generated prior to the purchase date, or if regulators impose penalties for violations of environmental laws occurring prior to the deal taking place. 17.3 Key Issues in Environmental Due Diligence The issues will depend on the type of legal issues involved in the transaction. For example, if a target company is an industrial facility, the most important legal issues will revolve around determining whether
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