• Canada becomes the first sovereign borrower to include certain nuclear energy expenditures in its green bond framework.
• Canada successfully raises an additional $2 billion through the re-opening of its 10-year green bond.
• Environmentally and socially responsible investors represented 53% of buyers, showing strong demand.

The Government of Canada has successfully re-opened its second Canadian-dollar-denominated green bond, raising an additional $2 billion. This re-opening of a 10-year bond is part of Canada’s commitment to regular green bond issuances, following its initial issuance in February 2024.

Why it matters: This offering is the second under Canada’s updated Green Bond Framework, which now allows certain nuclear energy expenditures to be eligible for green bond proceeds. By including nuclear energy, Canada demonstrates its commitment to being a global leader in clean nuclear power and underscores the role of nuclear technology in achieving net-zero emissions by 2050.

Investor Interest: The issuance saw robust demand from environmentally and socially responsible investors, who represented a majority of buyers at 53%. The final order book stood at over $3.8 billion, reflecting strong investor confidence in Canada’s economic management and AAA credit rating.

Looking Ahead: The government intends to proceed with two smaller green bond transactions in fiscal year 2024-25—this re-opening and a separate offering at a later date—to meet the planned issuance outlined in Budget 2024.

Background

• Updated Green Bond Framework: On November 21, 2023, the Government of Canada released an updated Green Bond Framework that includes certain nuclear energy expenditures. This aligns with the government’s position that nuclear power is vital for Canada’s path to net-zero emissions by 2050.
• Alignment with Best Practices: Activities selected as eligible expenditures under Canada’s Green Bond Framework are based on best practices followed by other sovereign green bond issuers. Canada is closely monitoring the international green bond market and similar frameworks being implemented by other countries and jurisdictions.
• Third-Party Endorsement: Sustainalytics, an independent ESG research firm, concluded that Canada’s Green Bond Framework is a credible and transparent plan to deliver positive environmental benefits.

Transparency and Reporting: In August 2024, the government released the Green Bond Allocation and Impact Report 2022-2023. Canada will release allocation and impact reports annually following each green bond issuance until full allocation of the net proceeds is achieved. These reports will detail the green eligible expenditures funded with the proceeds and outline the environmental benefits and related social impacts.

Related Article: Canada To Set Mandatory Climate Disclosure Criteria for Large Private Companies

The bottom line: Canada’s successful re-opening of its 10-year green bond and the inclusion of nuclear energy in its Green Bond Framework highlight the country’s leadership in sustainable finance and its commitment to achieving net-zero emissions by 2050.

Canada’s Goal to Encourage Sustainable Investing

In addition, the Government of Canada is developing voluntary sustainable investment guidelines, known as a taxonomy, to categorize investments based on scientifically determined criteria aligned with reaching net-zero emissions by 2050 and limiting global temperature rise to 1.5°C. This high-standard taxonomy aims to mobilize private capital for green and transition activities, particularly in sectors like electricity, transportation, buildings, and natural resources. While not mandatory, it will provide a credible framework for financial institutions, lenders, and companies to support Canada’s decarbonization efforts and contribute to international dialogue on transition finance.