Toronto: Canada’s capacity for green bond issues will be at least $56.3 billion in fiscal 2017/18, according to an April 10 Corporate Knights report released 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.
“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 $23.6 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.
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. The federal government has yet to make an issue. In a separate report released the previous week, RBC Capital Markets concluded that a sufficiently liquid and effectively functioning domestic green bond market would need to scale up to $10-$20 billion in size.
As part of its analysis, Corporate Knights also assessed the current ReNew Canada list of the top 100 infrastructure projects in Canada, and found that fully 56 of them – with a total value of $107 billion – would be green-bond eligible.