As the risks posed by severe climate change become more apparent, public and private investors have turned towards financing instruments to raise capital for sustainability initiatives.
In response to this demand, the World Bank launched its inaugural Green Bond in 2008. Designed as a tool to raise awareness and attract mainstream investors and institutions to sustainability initiatives, it has managed to launch a rising new trend in the global bond market that is continuing to build momentum today.
Backed by both investors and environmentalists, the World Bank’s Green Bond framework has seen over US$ 5.6 billion in Green Bonds issued in 17 different currencies, with transactions ranging in size from US$ 5 million to US$ 550 million. The most common categories of Green Bonds, according to HSBC, are renewable energy sources, energy efficiency, and sustainable land use management.
In 2013, the Green Bond market underwent rapid growth, growing in popularity among issuers such as governments, municipalities and corporations, and signalling a growing interest in environmentally-sustainable financing. Forecasts by HSBC predict that the Green Bond market will reach at least US$25 billion in 2014, showing significant growth over the US$11.4 billion issued in 2013.
In early 2014, Export Development Canada (EDC) launched its first-ever Green Bond, a $300 million, 3-year offering, selling out within the first 15 minutes. Under the Green Bond framework, eligible transactions include goods, services or projects that are beneficial to the environment, such as those focused on environmental preservation, protection and remediation.
Financing for BioAmber Sarnia facility
One of the newest additions to EDC’s green asset portfolio is the financing of BioAmber Sarnia which, once completed, will be the world’s largest bio-based succinic acid facility. Bio-based succinic acid, a natural alternative to petroleum-based succinic acid, has a range of applications, including as a raw material for polyurethanes, coatings, adhesives, sealants, and personal care ingredients. The Sarnia facility will have an annual production capacity of 30,000 metric tons, with the potential to expand to 50,000 metric tons for the commercial market by 2016.
“BioAmber’s new Sarnia facility is an excellent example of next-generation clean technology, bio-based and carbon neutral materials for industrial production,” said Carl Burlock, EDC Senior Vice-President, Financing and Investments.
“Our focus was to develop a commercial financing structure that was flexible enough to meet BioAmber’s needs and those of the partner banks, because private-sector financing will be critical to building a stronger BioAmber Sarnia and clean tech clusters in Canada overall,” added Burlock.
“The Green Bond program is an area where the interests of investors and EDC converge,” says Susan Love, EDC Vice President and Treasurer. “Support for clean technology is a strategic priority, so we hope to develop and grow Green Bonds into a regular part of our funding program.”
The Canadian bond market has seen considerable growth in its Green Bond offerings in the last year, with TD Securities, Enerfin Energy, First Solar Energy and Brookfield Renewable Energy Partners all launching their own Green Bond offerings.
EDC’s Green Bond Framework has been endorsed by the Centre for International Climate and Environmental Research (CICEROs), an independent research centre at the University of Oslo in Norway.