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Canada needs to invest in green bonds to support infrastructure goals

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.

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Why not use tolls and fees to fund green projects?

Over the last few months, the City of Toronto and the Ontario government have made some amazing announcement focused on green energy, infrastructure, and public transportation. The most recent announcement was made Tuesday: the Ontario government released $750 million in funding (in the form of a green bond) for environmentally friendly, low-carbon infrastructure projects, the majority of which would be dedicated to transit in the GTHA.

These investments are a good thing. A great thing, even. This city and this province must invest in infrastructure and transit. But, where is this money coming from?

A green bond is a great tool to raise capital for projects with environmental benefits, but eventually the bond holders need to be paid back. Investors provide funds for these projects and the government guarantees a return for each investor. When asked by Women’s Post if there was a plan to pay back these investors, this was the response given:

“Ontario’s Green Bonds rank equally with Ontario’s other bonds,” a spokesperson for the Ontario Minister of Finance said in a written statement. “Payments of principal and interest will be a charge on and payable out of the Consolidated Revenue Fund of Ontario and not tied to the revenues of any particular projects.”

Luckily, the maturity date for the green bond is in 2023, which means that the government has time to educate the public on the need to come up with the revenue for these investments. And it will be interesting to see what forms of repayment they create.

Tolling — while under both the provincial and municipal responsibility depending on the road — would be an ideal form of revenue. Ontario is starting a pilot project in the summer that will allow single-occupancy vehicles to use the High-Occupancy Vehicle lane meant for carpooling. Vehicle owners will be able to purchase a permit and pay a toll for its usage. This is the first time a responsible government has risked their positions to do the right thing.  Toronto is a long way off, with only a handful of councillors willing to stand up for the revenue tools Toronto needs to pay for the capital projects the city has committed to.

The money collected from these tolls can be used to fund the  the relief subway line which will provide an alternate east-west route to the Gardiner. Council has to make the bold move to call for other user fees – tolls, carbon tax, parking increase – so that property owners won’t carry the full burden of our capital deficit.

Both the city and the province are trying to find money in the budget — which amounts to shuffling through the same insufficient funds that caused our infrastructure deficit.   Toronto councillors will need to show the bravery their province counterparts have demonstrated in committing to high occupancy toll lanes.  The obvious solution is to use existing green projects such as tolling, congestion fees, or even a carbon-tax , to fund infrastructure investments.

The biggest problem facing all levels of government is that most Canadians want the infrastructure but they don’t want to pay for it.   The province is doing an amazing job ensuring that transit and green infrastructure is built, but Canadians have to start doing our part.

Let’s support the use of tolls, congestion fees, carbon taxes – whatever our council might bravely suggest — and start investing in Toronto’s long-term future.

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Ontario raises over $700 million for green transit

Tuesday, the Ontario government announced $750 million in funding (in the form of a green bond) for environmentally friendly, low-carbon infrastructure projects, the majority of which is dedicated to transit in the GHTA.

Proceeds from the bond will help fund eight projects that will improve transit, education, health care, and employment across the province.

“Effectively combating climate change requires smart investments in environmentally friendly infrastructure projects such as improving energy efficiency and building more public transit,” Glen Murray, Minister of the Environment and Climate Change, said in a statement. “Green bonds give all Ontarians the opportunity to invest in climate actions that will protect the environment, strengthen the economy and improve everyday life.”

The funding will go to the following projects:

  1. Eglinton Crosstown LRT: $402 million for things like constructing electric powered transit vehicles that produce near-zero emissions.
  2. York VivaNEXT Bus Rapid Transit Expansion: $100 million to improve access to public transit.
  3. Go Transit Regional Express Rail: $200 million to help reduce greenhouse gas emissions by using electricity instead of diesel in trains. The funds will also be used for LEED gold-level certification for all Regional Express Rail stations and facilities

Green bonds were pioneered by the World Bank in 2008 as a tool to raise capital for projects with environmental benefits. The government guarantees a return for each investor. The maturity date for paying back the bond is also quite slow — Ontario priced a $750 million bond with a maturity date of January 27, 2023.

This is the second green bond Ontario has issued. The first bond was issued on Oct. 2, 2014 in the amount of $500 million.

Ontario is the first province in Canada to issue green bonds.

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