Ottawa reveals details of first green bond sale

The federal government raised $5 billion from investors this week in its first-ever sale of a so-called green bond, an increasingly popular investment vehicle that promises to tackle climate change while earning money.

Ottawa announced its intention to issue green bonds in the 2021 federal budget, but the first real sale of a federally guaranteed bond closed on Tuesday.

Tourism Minister Randy Boissonnault, Environment Minister Steven Guilbeault and Associate Finance Minister Rachel Bendayan were on hand to unveil details of the bond sale at a press conference in Ottawa on Wednesday.

The initial offering called for $5 billion in bonds that will mature in December 2029. Bloomberg data suggests the bonds had a 2.25% coupon on them, meaning they will pay investors that much every year for the next seven years before their initial investment is returned to them in 2029.

This yield is about 0.25 percentage points higher than that offered by ordinary government debt of a similar period, giving bonds a so-called greenium relative to other investments.

“There was modest greenium for the deal, which was in high demand by domestic and international investors,” said Trevor Bateman, head of credit research at CIBC Asset Management.

Green bonds have become increasingly popular among investors seeking safe returns in infrastructure and other projects that alleviate concerns about sustainability. While Canadian companies, including Enbridge and Telus have issued their own green bonds, this week’s offering is the first such bond by the federal government.

The funds will be used to finance environmentally friendly projects

Boissonault said the bond offering was twice as popular as expected, with more than $11 billion in offerings to come.

“This is the largest order book to date for a Canadian dollar green bond of any issuance in the history of Canadian financial markets,” said Boissonault.

The funds will be used to pay for things such as renewable energy projects, clean transportation initiatives, wastewater management and other initiatives, according to a statement.

More than US$500 billion of green bonds were issued globally last year, and this year is on track to be even higher.

“When I was an environmental activist, you had to convince people to pay attention to climate change,” Guilbeault said. “Those days are practically over.”

“Today’s announcement is proof that an economic victory is an environmental victory.”