By Michelle Brownlee (Sustainable Prosperity) and Tess Olsen-Rong (Climate Bonds Initiative)

 

Today, Sustainable Prosperity and the Climate Bonds Initiative released the fourth annual Green Bonds Canada Report, which is a special supplement to the Bonds and Climate Change: The State of the Market in 2015 global report. Every year, we collaborate to track the highlights from the current year, the emerging trends, and the opportunities ahead for green bonds in Canada.

Here, Sustainable Prosperity’s Michelle Brownlee and the Climate Bond Initiative’s Tess Olsen-Rong outline this year’s findings from the Canada Report.

But first – a quick refresher – what’s a green bond?
Green bonds are a key tool to help finance the transition to a low-carbon economy and to meet global, national and local sustainability objectives. The Climate Bonds Initiative tracks green bonds in 2 ways – the ones that are officially labelled as green bonds, and the ones that aren’t labelled, but which support green/clean/low-carbon/climate-resilient initiatives. In Canada, they are used being used to finance projects in areas like urban transit, renewable energy, waste, agriculture, energy efficiency and more.

With that in mind, here are the findings from our 2015 Canada Report:

Highlights from 2015
• The global report estimates US$597.7bn climate-aligned bonds are outstanding in the market as of 10th June 2015, with US$65.9bn of these bonds being labelled green bonds. Canadian issuers account for C$29bn in outstanding climate-aligned bonds as of June 10, 2015, of which C$1.3bn represents labelled green bonds.
• The Canadian bonds are supporting projects across different sectors, but energy is clearly the sector taking the lead, representing over 2/3 of the outstanding Canadian green bonds.

Emerging Trends
• Part of the growth in the global market in recent years is due to Canadian green bond issuances from government agency Export Development Canada (EDC), The Government of Ontario and Toronto Dominion (TD) Bank in 2014.
• And while the first part of 2015 was a bit slower in terms of Canadians issuances than last half of 2014, it looks like 2015/2016 is going to be a big year for issuances. Just this month, EDC released a US$300 million green bond. The Province of Ontario has committed to another green bond issuance in 2016, and political commitments to green bonds made by Canada’s new federal government may lead to an upsurge in Canadian green bonds supply.

Opportunities Ahead
• Looking globally, this month’s climate change Conference of the Parties (UN CoP-21) meetings will likely lead to both short-term announcements of upcoming issuances and new national climate finance policy developments.
• In Canada, there’s no lack of opportunity for projects to finance in Canada, in all the sectors that are already benefiting from green bond investment, and in others - there are untapped opportunities at the municipal level, and in areas such as water, which is an active green bond hot spot in the US.

The bottom line – green bonds are not a niche financial tool. Both internationally and in Canada, they are big, growing, investment-grade, and of critical importance in helping finance the transition to a low-carbon economy and to meet global, national and local sustainability objectives.

Want to know more? Check out the report.

Watch Michelle Brownlee discuss green bonds in Canada: