Ontario’s provincial government reported on Tuesday that it has raised another $750 million with its second issue of green bonds — financings that raise funds for environmental projects — to fund eight new infrastructure projects.
The government issued the green bond to support eight environmentally friendly, low-carbon infrastructure projects, including funding for near-zero emissions light rail transit in Toronto; expanding public transit; and the construction of several new energy-efficient facilities for both educational and health-care organizations.
Ontario’s government reports that 52 investors participated in the latest issue of green bonds, primarily institutional investors, with 70% of the issue going to investors with green mandates and/or firms that have signed on to the United Nations’ principles for responsible investment.
Ontario issued its first green bond in October 2014, claiming that it was the first government in Canada to do so. That financing raised $500 million for “green” infrastructure investment.
This latest green bond issue comes on the heels of a report from New York-based Moody’s Investors Service Inc., which says that global issuance of green bonds could reach record levels in 2016 and may surpass US$50 billion, up from the record US$42.4 billion that was issued in 2015.
Investor demand for green bonds is strong, and the regulatory environment is also conducive to issuance (particularly new guidelines for these sorts of bonds in China and India), the Moody’s report notes.
In particular, China’s green bond market “could potentially expand more rapidly than internationally designated green bonds in 2016 due to central bank policy support and incentives announced for financial institutions issuers in the form of collateral eligibility, relending and interest subsidies — terms which are generally not available in other countries,” the report states.
“We expect the momentum from the UN Conference on Climate Change (COP21) as well as the signing of the Paris Agreement scheduled this April to likely motivate additional and repeat issuance of green bonds,” says Henry Shilling, senior vice president with Moody’s, in a statement.
The Moody’s report points out that 105 distinct issuers came to market with 197 “green bond” transactions, averaging US$215 million, in 2015. Furthermore, the report notes that global issuance spiked in the fourth quarter to US$15.2 billion, which was bolstered by active issuance in November just ahead of the start of COP21.
“Issuing Ontario green bonds helps grow our economy,” says Ontario’s Finance minister, Charles Sousa, in a statement. “As global financial markets seek new and innovative opportunities to invest in socially responsible initiatives, many are turning to Ontario, which is already the top destination in North America for foreign direct investment. Ontario’s green bond program attracts more strategic investment to increase our competiveness and create jobs in our province. It funds the construction of specific infrastructure projects that improve our environment and supports a cleaner, more sustainable future for all Ontarians.”