Ontario’s inaugural global green bond offering, a $500-million offering of four-year notes, were priced Thursday to yield 1.796%. Here are a few observations:
• It was the first government or government related offering of green bonds by a Canadian issuer. Last January the Export Development Corp. completed the country’s first green bond offering but that offering was done in the U.S. and priced in U.S. dollars.
• It was the first Canadian dollar-denominated global offering by the province of Ontario in two decades. The province, which has a healthy deficit, has done a number of U.S. dollar-denominated global offerings but until Thursday’s transaction, it hadn’t raised Canadian dollars on a global basis since 1994.
• More than 85% of the final sales were allocated to investors, which were green in some aspect of their business, meaning those investors, which had made a commitment to either socially responsible investing or the U.N.’s principles of responsible investing.
In other words preference was given to those investors, which had green mandates. Indeed, attracting a new group of investors rather than obtaining cheaper financing terms, is one reason why Ontario is interested in selling green bonds.
According to the website of the Ontario Financing Authority, the province “expects to publish the names of investors involved in the initial offering of Green Bonds on a voluntary basis in public documents.” However it will not do so “without first obtaining the written consent of each investor.”
• About 80% of the bonds — or $400-million principal value — were placed with Canadian investors. The other 20% of the issue found a home in either the U.S. or Europe or Asia.
• As for the use of proceeds from the issue, the OFA’s web site said that the Eglinton Crosstown Light Rail Transit project has been identified as the first transit project to receive funding through Green Bonds.
• Given the small green bond market in Canada but the large green market elsewhere, particularly in Europe, Ontario’s Green Bond Framework was developed in consultation with the Oslo-based Center for International Climate and Environmental Research (CICERO).
On its website, CICERO said that its so-called second opinions “are independent, research-based evaluations of green bond investment frameworks to determine their robustness in meeting the institutions’ environmental objectives.” The second opinion is so named because it’s completed after the initial analysis done by the issuer. “CICERO provides recommendations for improving the likelihood of the investment framework to meet its environmental goals,” said its website.
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