Although the narrative of Argentina’s current administration is aligned with the ESG backlash movement, the country’s ESG regulatory landscape has not significantly changed since President Milei took office, writes María Victoria Tuculet, a financial services and ESG partner at Bomchil in Buenos Aires.
President Javier Milei pulled Argentina’s delegation from the COP29 climate conference in November and is weighing up the possibility of the country leaving the Paris Agreement, following the recent exit of the United States.
At the same time, Argentina’s bid to join the Organisation for Economic Cooperation and Development (OECD) is a matter of national interest for the government. To be admitted as member, Argentina would have to adopt the OECD’s ESG guidelines and principles – such as those on responsible business conduct and human rights – and these would therefore apply to Argentine companies.
In the midst of these contradictions, the government seems to be interested in certain ESG topics. One of these is the development of carbon markets and the monetisation opportunities that could arise from greenhouse gas (GHG) emissions mitigation or reduction projects (such as changing the energy matrix towards cleaner and more sustainable sources).
Last year, the government’s Bases Draft Bill contemplated a set of provisions conferring powers upon the executive branch to (i) establish emissions targets by sector or industry; and (ii) institute a market for GHG emissions allowances. However, the Bases Draft Bill, as originally drafted, was not passed by Congress and the final Bases Bill that was approved by Congress did not include the provisions regarding carbon markets and emissions targets.
Meanwhile, the Buenos Aires Stock Exchange (BYMA) launched in October 2024 a trading platform for carbon credit certificates in the voluntary carbon market. In December 2024, the platform registered its first transaction. This activity was authorised by the Argentine Securities Commission (CNV) as a related and complementary activity of the BYMA, without implying the use of BYMA’s stock market licence granted by the CNV.
In other areas of ESG, the CNV’s soft and non-mandatory guidelines on corporate governance, ESG disclosure and sustainable financing through the capital markets has neither been amended nor abrogated and no significant changes are anticipated in this field. In fact, despite Argentina’s macroeconomic volatility and lagging capital markets in 2024 (which started to improve in the second semester), the labelled bonds market (green, social, sustainable and sustainability-linked bonds) seems to be consolidating since the creation of the ‘SVS panel’ by BYMA in 2019 and the ‘VS panel’ in 2022 with 86 listed instruments in aggregate.
However, Argentina, like other markets, still lacks concrete regulatory incentives or advantages for companies that want to issue labelled instruments that would help to boost the development of the sustainable financing market. The creation of regulations tackling the incentives issue will depend on how the government intends to address its dilemma of pursuing an anti-ESG narrative while attempting to join international organisations such as the OECD.
Unlike carbon markets, sustainable financing and corporate governance, the ‘S’ of ESG seems to be the government’s target after President Milei’s declarations in the World Economic Forum. In this vein, the government announced that is working on a draft bill to abrogate several diversity policies that have been approved over the last 15 years, such as stripping out the femicide crime figure from the Criminal Code, the trans quota in public jobs and the non-binary ID.
The puzzle becomes even more complex with the extraterritorial effects of European Union regulations on deforestation and corporate sustainability reporting. In this line, the government faces a challenge if it is keen to attract European funds and investors under the large investments incentive regime (RIGI), since tackling ESG matters is a must for these types of investors.
In all, after one year in office, it is clear that the government is not boosting ESG policies in Argentina. However, there is a tension between the backlash narrative and the ‘maintaining the status quo’ approach of the government, at least in the ‘E’ and ‘G’ fields of the regulatory landscape. After Milei’s declarations in the World Economic Forum, however, it seems that the ‘S’ will be shaken by legislative proposals that would suggest an abrogation of several diversity policies, as discussed above.
If the intention of the current administration is to put itself on track for admission to international forums and organisations such as the OECD, its approach to ESG matters should change. Finding a balance between its narrative and its policies is likely to be a challenge for the government in the coming years. However, considering that mid-term elections will take place in 2025, it is likely that the government will be more focused on the narrative whilst maintaining the status quo in the ‘E’ and the ‘G’ fields.
The opinions expressed in this article belongs to the author and do not reflect the view of the firm.