(Ottawa) Investors will soon be able to buy a new government bond to finance green projects, said federal Environment Minister Steven Guilbeault. These projects will be selected according to guidelines which, according to experts, could dampen the ardor of certain investors.
Posted at 3:30 p.m.
Updated at 4:58 p.m.
The Liberals want to issue $5 billion in green bonds and spend the proceeds within two fiscal years of the money arriving.
Minister Guilbeault said the government is aiming for an inaugural program in the coming weeks.
In a speech at the Canadian Club Toronto on Wednesday, Guilbeault called bonds a crucial part of the government’s strategy to mobilize the investments needed to create a sustainable economy.
However, experts say the government will need to enforce a high set of standards on where the money goes to avoid investors questioning the credibility of the eco-label on the bond.
Globally, the green bond market has grown in the context of talks on financing the ecological transition. According to a recent Royal Bank report, approximately $2 trillion could be needed nationally to bring the economy back to net zero within 30 years.
Investors looking for green bonds should know that their money is going to initiatives that match their understanding of what “green” means, argued Christie Stephenson, executive director of the Peter P. Dhillon Center for Business Ethics. from the University of British Columbia.
“There is some well-placed caution around green bonds in general, but I also think they offer a lot of opportunity,” she said.
“What is not useful for companies is to do what they have always done and reclassify them as green bonds. I think investors are hoping that green bond issuance really stimulates the greening of companies, that it really funds projects that otherwise would not be funded. »
She argued that issuers need to be clear about how products are used so investors know what they’re getting and can make an informed decision.
Guidelines recently issued by the Department of Finance indicated that the funds could be used for new projects or for those receiving federal assistance in the two fiscal years preceding the issuance.
Among the projects or programs that could benefit from green bond funds, the guidelines listed new charging stations for electric vehicles, the federal commitment to plant two billion trees or tax credits for home renovations.
Academic Collaboration Consulting founder Sherena Hussain said some projects may show a more direct link to environmental outcomes, such as those reducing emissions.
Projects have a life of their own and it could prove difficult for the government to consistently show that they are meeting targets and spending milestones, she said.
“Based solely on the nature of these projects, it is very difficult to tick the box the same way every quarter or every year, argued Ms.me Hussain. These projects are organic and have their own set of risks and emissions profiles which overall, in theory, could tick the box, but in practice it can be a bit trickier to do. »
Alex Speers-Roesch, a Greenpeace Canada campaigner who has closely followed the green finance efforts of the Department of Finance and the Bank of Canada, mentioned that the Liberals must finance “flawless” green projects in the first issue of green bonds to reassure investors.
Mr Speers-Roesch, who heads the organisation’s oil campaign, also said guidelines suggesting the money could be earmarked for carbon capture and storage systems could discourage investors if the money is used. by the oil and gas sector to reduce emissions.
Federal guidelines for the bond prohibit funding programs or projects related to pipelines, oil and gas exploration and production, and nuclear power projects.
A review of the guidelines, led by firm Sustainalytics, gave the plan an overall boost to meet market needs and send money to initiatives that impact the environment.
The company also noted that some eligible projects could have “negative environmental and social outcomes” that the government should manage and mitigate, including any violation of Indigenous rights or local ecosystems by hydropower projects.