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Ontario announces proposed “green bond”

Last year we celebrated some of the most promising new financial players in social finance from across Canada.  We highlighted everyone from mainstream financial institution, RBC, to the visionary behind the Centre for Social Innovation’s community bond – but no Canadian government actor was nominated for the award.  On Wednesday, the Government of Ontario announced its intention to implement green bonds as a new way to fund transit projects across the province. In doing so, the Ontario government has the potential to take on a new role as a financial player in the Canadian social finance landscape.

Originally pioneered by the World Bank in 2008, “green bonds” began as an innovation intended to coordinate private and public sector activity in the fight against climate change. More generally, the term “green bond” is used to describe a bond with specific environmental outcomes.  Last Wednesday, the Government of Ontario announced it is proposing green bonds as a new way to fund transit projects across the province.

image-1The Office of the Premier released the following statement:

“Premier Kathleen Wynne announced Wednesday that the government plans on creating green bonds to finance environmentally friendly infrastructure projects across Ontario. The new bonds would capitalize on the province’s ability to raise funds at low interest rates, and serve as a tool for the government to address critical infrastructure needs, create jobs and strengthen the economy. Ontario’s green bonds would meet international certification and disclosure standards, which would enable them to be officially recognized as investments in sustainability.

In the coming months, the government will consult with investors in Canada and around the world on how to structure the green bonds to best meet the needs of both investors and the province. The province plans to issue green bonds next year, subject to the passage of legislation and the receipt of certification.

Making investments in infrastructure is one of the three pillars of the Ontario government’s economic plan. Through the other two pillars, the government is also investing in people and supporting an innovative and dynamic business climate.”

A green bond, if implemented, would be an exciting innovation on the part of the Government. Furthermore, it would mark an opportunity for institutional investors – such as pension funds, mutual funds, insurance companies and sovereign wealth funds – to become investors in the social finance marketplace, argues a report released by TD Economics entitled, “Green Bonds: Victory Bonds for the Environment”.

The report goes on to suggest, as many of our writers including Timothy Nash and Aaron Emery have time and again, that “going green is win-win – it’s good for both the world and [investor’s] wallets”.  We look forward to following this story and seeing what potential there might be for more widespread adoption of the green bond concept by governments across Canada.

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