‘Green’ market could soon flourish
Canada could grow into a thriving market for climate friendly “green bonds” if the federal government meets a campaign pledge to turn to this type of financing.
Proceeds of green bonds are designated for projects that benefit the environment such as clean transportation and renewable energy.
Canada is preparing to spend more than US$180 billion over 12 years to support infrastructure, including green infrastructure. Green bond issuance by the government could kick- start deals from the private sector and boost liquidity in the green bond market. This might reduce the cost of borrowing for environmental projects, given growing demand from socially responsible investors.
Currently, “even if you want to buy, you can’t. There are not too many new issues and the issues that come, they are small in size,” said Hosen Marjaee, senior managing director, Canadian fixed income at Manulife Asset Management. According to the Manulife website, it has US$ 135 billion assets under management in fixed income.
Last year, Canadian dollar issuance accounted for less than US$1 billion of the fast- growing global green bond market, which totalled US$ 82 billion, a report by RBC Capital Markets showed.
“If the government of Canada issued green bonds, that would support the market. It may bring in other provinces or corporations to issue as well,” Marjaee said.
The Canadian government’s “aggressive green agenda,” which i ncludes i ntroduction of carbon pricing in 2018, sets the stage for Canada to become the third sovereign issuer of green bonds, after Poland and France, RBC said.
A spokeswoman for the Canadian finance ministry said the government was monitoring developments in the green bond market.
“Conventional bond markets continue to offer our government the most costeffective manner to support these commitments,” said ministry spokeswoman Annie Donolo.
Canada has federal and provincial governments with “big green ambitions” and many interested investors, said Sean Kidney, chief executive of the investor- focused Climate Bonds Initiative. That’s “a pretty good recipe” for a robust market.