Commercial, Finance, Sourcing Renewables - February 27, 2024
Canada Issues Second Green Bond
The Government of Canada announced plans to issue its second Canadian-dollar-denominated green bond this week with the addition of nuclear power expenditures.
This issuance will be the first under Canada’s updated Green Bond Framework that was released on November 21, 2023, according to an announcement. As announced in the 2023 Fall Economic Statement, certain nuclear energy expenditures are now included in the framework, in line with current green bond practices from energy utilities in Ontario and the European Union.
Canada is the first sovereign borrower to include certain nuclear expenditures in a green bond. The government issued its first 7.5-year, $5 billion green bond in March 2022.
Issuing green bonds will help the country meet its 2030 emissions reduction targets and achieve net-zero emissions by 2050. Green bonds unlock private financing to speed up projects such as green infrastructure and nature conservation.
The Government of Canada’s green bonds will meet demand from investors seeking green investment opportunities backed by Canada’s AAA credit rating, while contributing to the development of a stronger sustainable finance market in Canada.
In March 2023, the government published its inaugural allocation report on the distribution of green bond proceeds.
Canada’s Green Bond Framework is aligned with the green bond frameworks of other sovereign issuers that have been widely accepted by green bond investors and market indices. Other sovereign green bond issuers include France, Germany, Sweden, Spain, Italy, and the United Kingdom.
The European Union’s Taxonomy for Sustainable Activities expressly included some nuclear activities as green until 2040-2045. The Sustainable Finance Action Council’s Taxonomy Roadmap also considers certain nuclear expenditures to be green.
Energy utilities in Ontario, such as Ontario Power Generation and Bruce Power, and in the European Union, such as Électricité de France (EDF), already issued green bonds including certain nuclear expenditures, which were well received by investors.
On October 5, 2023, the European Parliament adopted its European Green Bond Standard, which made certain nuclear expenditures eligible and will come into force on October 5, 2024.
Canada’s updated Green Bond Framework identifies eligible expenditures for allocation to a green bond which include:
- Clean transportation;
- Living natural resources and land use;
- Energy efficiency;
- Terrestrial and aquatic biodiversity;
- Clean energy, including nuclear;
- Investments in new reactors;
- Refurbishment of existing facilities;
- Research and development; and
- Some investments in Canada’s nuclear supply chain.
- Climate change adaptation;
- Sustainable water and wastewater management;
- Circular economy-adapted products, production, technologies, and processes; and
- Pollution prevention and control.
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