Glen Murray, Kathleen Wynne, Charles Sousa, and Toby Heaps on Wednesday.

The government says new types of debt won't mean more debt on the province's already-groaning accounts Wednesday morning, as Premier Kathleen Wynne, Finance Minister Charles Sousa and Transportation and Infrastructure Minister Glen Murray announced the province would be the first jurisdiction in Canada to offer "green bonds," a debt issue backed by a commitment to build green infrastructure ─ and the Ontario taxpayer.

The green bonds plan will be part of the fall economic update coming from the finance minister on Nov. 7, and the government expects to issue the first bonds in 2014. The bonds would be certified by a third-party body to ensure investors that the money raised would only be spent on green infrastructure, for which something Toby Heaps, founder of Corporate Knights, says there's a growing demand from global investors in search of a solid return on sustainable investments.

"Long-term investors really want to invest in climate-friendly investments with a fixed income. They're not willing to take a haircut to do it yet, but these are the kinds of investors that if there were a green bond they'd be beating a path to the doorstep to buy them," Heaps says. "A green bond taps into $22 trillion of demand."

Heaps and Sousa both invoked the recent example of Massachusetts, which had a successful green bond issue in June of this year. The Wall Street Journal reported that the state's green bond issue was oversubscribed (receiving $130 million in bids for $100 million in bonds), while the state was temporarily only able to sell $575 million of its general offer bonds.

"These bonds will help attract institutional investors, and they will be competitively priced based on what the market bears," said Sousa. "Our offering is welcome news by the marketplace. We're also looking at ways to include retail investors."

Heaps added (with Sousa nodding beside him) that green bonds don't necessarily mean additional debt. "They're about replacing existing debt with more accountability."

Heaps told QP Briefing "the bond markets create discipline for governments. James Carville during the Clinton years said 'I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.'"

According to Heaps, only one green bond issue he knew of had failed, but he attributed that in part to the global financial crisis in 2008.

Phillip C. Gillin, senior managing director at Sun Life Financial, says the key element is the growing appetite across the financial sector to both appear like and be actual sustainable organizations.

"Sun Life is a significant investor in fixed-income markets. We're one of the largest investors across Canada in renewable energy, for example. To the extent that these bonds become available in Ontario, we'll certainly look at them."

The World Bank has issued $4 billion in green bonds since 2008, according to its website. Projects that qualify for green bond money include renewable energy, energy efficiency and conservation, and mass transit.

On Wednesday morning, Sousa said that public transit was one example of a project that could be funded by green bonds, or any project that helps reduce Ontario's carbon footprint.

Murray added that there are residential and commercial real estate developments in downtown Toronto and Markham that could be accelerated by getting public transit access, with the kind of returns that would support a bond issue.

"It replaces debt with a very disciplined debt attached to a ROI," Murray says.

Wynne, Murray and Sousa tout ‘green bonds’ to build infrastructure

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