With the rising costs of climate change and environmental degradation, governments are vying for solutions by investing in green infrastructure.
One of the most effective ways to invest in these types of infrastructure and energy projects is through green bonds — and it’s high time Canada gets the ball rolling. Green bonds are fixed-income securities that are created to fund projects that have environmental and climate benefits.When a project needs to be funded, it is possible to reach out to investors or creditors to support a project through bonds as opposed to obtaining a loan from the bank. Typically, federal governments will issue green bonds from public entities and will also provide targeted tax incentives. The involvement of the government in green bonds lowers risk and improves return and makes the investment more desirable. This pushes large stock-holders to invest in green projects, and helps further build a green economy.
Canada has seen a total of $4.5 billion in total green bonds issued so far, with Ontario leading in investments in 2014 and 2017 consecutively. The Quebec government has also issued a bond, but the federal government has yet to release green bonds according to a report by RBC Capital Markets. The federal government and private market issuers have the capacity to support $56.3 billion worth of green bonds for green infrastructure in public transit, renewable energy, and electric vehicles. The support of the federal government is needed to make green bonds competitive in Canada.
Across the world, green bonds are growing as a viable way to build green infrastructure. In London, England, the Climate Bonds Initiative contributes $694 billion that are being used to support low-carbon infrastructure. China has invested $36 billion in green bonds. This type of investment makes it easier to gain government approval on green projects rather than regular development initiatives. Even in India, developers are turning to the rising international trend in green bonds to support building projects as their weakened banks shy away from the non-green alternatives.
Canada has the opportunity to become a global leader by moving away from a purely resource-driven economy. Alongside the $180 billion over 12 years the federal government has committed to spend on infrastructure, green bonds could help support that lofty goal. If the federal government invested heavily in green bonds for environmental infrastructure projects, it could also give the currently depressed resource economies in Western Canada a much needed push towards a green economy.
It shouldn’t only be the responsibility of the provinces to invest in green bonds. The green economy is the way of the future, and green bonds are yet another way to make that a reality. It is time for Canada to take a stand on the international stage and become an environmental leader worldwide.
