Green Bond Dealers Pore Over Trudeaus New Infrastructure Plan

The Canada Infrastructure Bank is in talks with investment banks and private investors about potential sustainable debt deals in a fresh sign that this financing is set to gain traction in the North American country.

The Canadian federal government-owned lender is implementing a C$10 billion ($7.6 billion) plan, of which at least C$6 billion will be focused on projects typically associated with the sustainable bond market. Some C$2.5 billion will be invested in clean power generation, transport and storage, C$2 billion in retrofitting buildings to reduce emissions, and C$1.5 billion for zero-emission buses and charging stations, according to the plan disclosed by Prime Minister Justin Trudeau earlier this month.

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“Our involvement in these deals should provide an opening for ESG-type financing,” Chief Investment Officer John Casola said. “Im in discussions with green bond providers and they are looking for the kind of projects that we are going to get into.”

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The CIBs plan is one of the steps being taken by the federal government to implement a road map on sustainable financing recommended in 2019 by a panel of experts led by Tiff Macklem, who took over as Bank of Canada governor earlier this year. In July, the government in Ottawa committed to provide funding to a Sustainable Finance Action Council, which will advise the government on the subject.

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CIB expects to announce specific projects in areas such as retrofitting buildings in the coming months, Casola said.

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“We very much hope that at the project level our participation will have the effect of bringing in private capital because our money is used to cover some risk that private capital wouldnt take without us,” Casola said.

Canadian companies and public sector institutions have issued the equivalent of $7.2 billion of sustainable debt so far this year, marginally higher than the $6.9 billion amount raised in the same period a year earlier, according to Bloomberg data. Global issuance of such securities has increased 59% to $322.5 billion from $202.5 billion.

Canada needs to invest C$128 billion over the next 10 years to meet its 2030 target of reducing greenhouse emissions to 30% below 2005 levels, according to a report released last month by the Institute for Sustainable Finance.

“We are going to be not targeted in our approach but we will welcome all of those types of financing,” said Casola referring to ESG financing. “We have a high degree of confidence that the capital will come once they understand the projects we are working on.”

— With assistance by Kait Bolongaro