Canadian Manufacturing

‘Green Bonds’ on the way as Ontario tries to pay for public projects

Tool to raise money to build infrastructure across the province will be unveiled in next week's fall economic update



TORONTO—Ontario will be the first province in Canada to issue so-called green bonds next year in an attempt to generate the billions of dollars needed to expand public transit, Premier Kathleen Wynne said.

The program, an innovative tool to raise money to build infrastructure across the province, will be unveiled in next week’s fall economic update.

“The worldwide market for green bonds in the last year has doubled, and it’s now estimated to be more than $346 billion—those are U.S. dollars,” said Wynne.

It will require legislation and certification, but it won’t need a confidence vote that could topple the minority Liberal government and trigger an election, Wynne said.

The new bonds would capitalize on the province’s ability to raise funds at low interest rates, said Finance Minister Charles Sousa.

It will actually save the province money over the long term because there are many investors who are prepared to pay to invest in specific green initiatives, he said.

Finance officials say the green bonds would be a part of the province’s regular borrowing program, but that portion will be dedicated to environmentally friendly transit projects.

“Rates for green bonds are expected to be in line with our current borrowing rates,” said Sousa’s spokeswoman Susie Health.

They’ll be targeted at larger institutional investors like pension plans, but the government will look at ways to accommodate interest from retail investors, Sousa said.

It won’t necessarily get the province cheaper financing in the short term, but it will attract new investors to put their money in Ontario, said Toby Heaps, president of Corporate Knights Inc. who joined Wynne in making the announcement.

“Investors are hungry for this kind of stuff, and there’s just a drop in the bucket of the supply for that demand,” he said.

Green bonds were not among the levies recommended by the provincial transit agency Metrolinx to raise the estimated $2 billion a year that’s needed to improve transit in the Toronto-Hamilton area.

Wynne also appointed a panel last month to examine those proposals, which included hiking the HST, a five-cent-a-litre regional gas tax, a $350-million-a-year business parking levy and $100 million a year in development charges.

Green Bonds are looking a lot better now, right?

The premier said the green bonds don’t preempt the panel’s work, because they address the broader issue of building infrastructure across Ontario. But acknowledged the chances for “overlap.”

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