Oil-Rich Canada Lays Out Ground Rules for Inaugural Green Bond

Esteban Duarte and Brian Platt
Thu, March 3, 2022



(Bloomberg) -- Canada, the world’s fourth largest oil producer, is a step closer to issuing its first green bonds after releasing the rules that govern the notes.

Green bonds are part of Canada’s larger plan to cut greenhouse gas emissions 40% to 45% below 2005 levels by 2030. The nation intends to issue C$5 billion ($3.9 billion) in sustainable debt to fund everything from planting trees to building carbon capture facilities, according to documents released Thursday by the finance department.

While the green-bond program will help the government to finance projects that reduce pollution, it excludes the oil and gas sector -- the biggest contributor to GHG emissions in Canada.

“This is part of a growing trend of sustainable finance and it’s going to help us gain some experience and understanding of it,” Environment Minister Steven Guilbeault said in an interview. “We’re really looking at best practices in the sector in terms of what can and can’t be financed with this money.”

As Canada gets closer to taking orders for the deal, companies and governments are rushing to the green bond market to finance environmentally-friendly initiatives. Global sales of green bonds hit a record $513 billion last year, according to data compiled by Bloomberg.

Canada’s government has been progressively adding mechanisms to deliver on its 2030 emissions reduction target, including imposing a national carbon tax. The country is already positioned to cut emissions by about 36% below 2005 levels by 2030, and is working on additional measures to achieve its targets.

Last year, the government named Kathy Bardswick, a former chief executive officer of The Co-operators Group Ltd, as the inaugural chair of Canada’s Sustainable Finance Action Council, which aims to support the development of a domestic sustainable finance market. Also in 2021, the government picked HSBC Holdings Plc and Toronto-Dominion Bank to arrange the transaction, as well as advise on the design of Canada’s green bond framework.