Green Bonds - Canada's very own Quantum of Solace?
In the sequel to Casino Royale, James Bond fights to save Bolivia’s water supply from bad guys posing as environmentalists….in Canada, we also have an opportunity to save our environment and become a renewable energy superpower by using Bond…well, actually, by using “Green Bonds”. It’s a concept billed by Action Canada as a modern-day Victory Bond for the environment.
Currently, because renewable energy isn’t price competitive, Canada’s abundant natural resources (wind, tidal, wave, biomass) are underdeveloped. Under its proposal, Action Canada says we can engage the public and speed up Canada’s path to becoming a renewable energy superpower (or as two Action Canada Fellows ambitiously said, “the Saudi Arabia of sustainable energy”!) by raising capital for green infrastructure.
Similar to a Canada Savings Bond, Green Bonds would be purchased by Canadians and would offer a government-guaranteed rate of return with little risk for the investor. The proposed Green Bonds would also be managed by the private sector and designed to accelerate the rollout of sustainable energy. Action Canada recommends that the funds raised through the bond sales be invested in renewable energy infrastructure and disbursed as low-cost loans to renewable energy producers, with the idea that bringing down the cost of debt capital will cause renewable energy to become more competitive.
The idea of Canadian “Green Bonds” was first inspired by the 2007 issuance by the European Investment Bank (by way of prospectus offering) of a pan-European 5-year “climate awareness bond“, which has already raised more than $1.5 billion for renewable energy projects. Other entities have jumped on the environmental bandwagon since the EU climate awarenesss bond. For example, on November 6, 2008, the World Bank, in partnership with Swedish bank SEB, announced its green bond initiative for financing projects such as wind farms and solar parks. In addition, there is a UK-based initiative known as Sheffield’s Green Bond that allows investors to contribute to the environmental stewardship of green spaces, waterways and youth environmental education.
A national public opinion poll conducted in November, 2007 by Nanos Research revealed that 81.8 per cent of Canadians polled supported the Green Bonds initiative, with 62.2 per cent saying they would purchase the new bonds if they provided an interest rate similar to Canada Savings Bonds.
In the recent federal election, Stephane Dion and the Liberals professed support for a green bond initiative. The stance of Prime Minister Harper’s government on green bonds is unknown and no commitments have been made. If the federal government won’t act now to support the idea of giving citizens the chance to spur investment in renewable energy infrastructure through their investment dollars, then the provinces need to step up. Green Bonds, in whatever form they ultimately take, are a win-win proposition -- jobs get created, clean energy capacity gets built and Canadians who invest in green bonds will enjoy a safe return on their investment (important in this economy) and a chance to do more than change a lightbulb – they will get a stake in a citizen-driven intitiative that allows them to play a tangible role in the development of a green economy.
