Skip to main content

The Government of Ontario is planning a $34-billion bond to help fund public transit.

Kevin Van Paassen/The Globe and Mail

There is a budding market for green bonds, the new financing vehicle the Ontario government is depending on to raise money for transit, but investors are not going to cast aside returns for a feel-good factor.

That's one conclusion of a new report from the economics team at Toronto-Dominion Bank, which looked at the nascent market for bonds issued to finance "green" environmental projects.

Ontario's government said Wednesday that it would look to the new market to raise money for such initatives as transit expansion. TD chief economist Craig Alexander said that the green feature will be attractive to certain investors, but they will still demand first and foremost a competitive yield.

Story continues below advertisement

"At the end of the day what matters most is the rate of return," Mr. Alexander said. He said he doubted that borrowing with green bonds would be any cheaper for a government than by using regular government bonds.

Investors will look for the return first, the credit quality of the issuer second and thirdly will look at the environmental connection, he said. But the green aspect will make a difference, says TD. The report, entitled "Green Bonds: Victory Bonds for the Environment," asserts that there is "great scope" for the market to grow.

"I honestly do think that feature is going to be attractive to some investors," Mr. Alexander said.

Ontario has yet to give many details on how the bonds would be structured.

In general, Mr. Alexander said that to avoid suspicions of "greenwashing" there must be a clear link between the money raised by the bonds and the underlying environmntal project.

"The green dimension of the bond could be attractive to certain institutional investors," he said. "The thing about the bond is, it absolutely has to have some mechanism to ensure that the capital being raised is in fact going to the green initative."

The market is so new, it is not even clear how big it is. TD's report cites estimates that it is somewhere between $10-billion and $346-billion, depending on how you define a green bond.

Story continues below advertisement

A large offering from a province such as Ontario might be attractive to investors because they generally like big bond issues, which are easier to buy and sell than smaller niche offerings. Ontario could end up setting an example for other governments, kickstarting growth in the green bond market.

"The Ontario experience is going to be a very important test of the green bond market in Canada."

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies