Canadian green bond market has potential to top $50 billion

By The IJ Staff | April 11 2017 09:45AM

Photo: Freepik

Canada's capacity for green bond issues will be at least $56.3 billion in fiscal 2017/18, according to a Corporate Knights report released April 10 at the RBC Capital Markets Green Bond Conference in Toronto.

The figure is based on an analysis of the capital requirements, debt-raising capacity, and intended uses of proceeds on the part of 21 of Canada's largest public and private bond issuers, said the Corporate Knights in an announcement.

Potential for exponential growth

"There's clear momentum in green bond markets, but it's still seen as a niche and perhaps even challenging financing tool," says Corporate Knights CEO Toby Heaps. "A billion dollars worth of bonds formally labeled as green are currently being issued in Canada annually. This analysis shows there's potential for exponential growth."

In 2017/18, the 21 potential bond issuers have a need and capacity to fund $23.60 billion worth of "explicitly green projects" – such as public transit, renewable energy, and loans for electric vehicle purchases and green power projects. They have a further need and capacity to fund $32.7 billion worth of "potentially green projects" – such as energy efficient construction or retrofitting of public buildings and installation of broadband, says the Corporate Knights.

Green bond issues currently sit at $4.5 billion

Total green bond issues to date in Canada sit at $4.5 billion, and include issues from the Ontario government in 2014 and 2017 – some of the proceeds from which are paying for Toronto's Crosstown LRT project – and an inaugural issue in February from the Quebec government.

Government infrastructure investments

"Our assessment demonstrates that there's more than enough potential for Canada to host a robust green bond market, to the benefit of both issuers and investors," says Heaps. He adds that there are multiple sources of momentum right now, including the large infrastructure investments being made by many governments and the renewed commitment to climate action.