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Issuing Green Bonds Without a Green Bonds Regulation: Canadian Experiences

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Greening the Bond Market

Part of the book series: EBI Studies in Banking and Capital Markets Law ((ESBCML))

Abstract

This chapter examines the transactional experience of issuing green bonds in the absence of a formal regulatory regime such as the one proposed by the European Commission in July 2021. The EU Green Bonds Regulation is a novel instrument, but the questions it tackles are not. They have been confronted by practitioners and market players for years now. (i) How to define an investment as “green” or “sustainable”; (ii) how to ensure an appropriate use of proceeds; (iii) what kind of disclosure should be provided to investors (in terms of substance and periodicity); (iv) how to ensure a robust third-party verification; and (v) how to assess the potential for liability for misstatements, improper use of the green bond proceeds or failure to report on the use of the green bond proceeds. This chapter describes how capital market private practice lawyers representing non-EU-based issuers have addressed these questions using a combination of international industry standards and transactional practice, drawing on the experience of Canadian corporate, sovereign and sub-sovereign issuers.

The authors would like to thank Annafaye Dunbar for her valued research and editorial work performed in connection with the writing of this chapter.

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Notes

  1. 1.

    Minister of Environment and Climate Change. 2021. https://www.canada.ca/en/services/environment/weather/climatechange/climate-plan/climate-plan-overview/actions-healthy-environment-economy.html. Accessed 23 December 2022.

  2. 2.

    Canadian Net-Zero Emissions Accountability Act, S.C. 2021, c. 22, sec. 6, https://laws-lois.justice.gc.ca/eng/acts/c-19.3/fulltext.html. Accessed 23 December 2022.

  3. 3.

    The first green bond issued by the World Bank was for an amount of Skr.3.35 billion (approximately USD 440 million), see “10 Years of Green Bonds: Creating the Blueprint for Sustainability Across Capital Markets,” World Bank. 2019. https://www.worldbank.org/en/news/immersive-story/2019/03/18/10-years-of-green-bonds-creating-the-blueprint-for-sustainability-across-capital-markets. Accessed 23 December 2022. However, it is recognized by some that the European Investment Bank’s (“EIB”) May 2007 EUR 600mn senior unsecured climate awareness bond was the first green bond issuance. For more, see: “15 years of EIB green bonds: leading sustainable investment from niche to mainstream,” European Investment Bank. 2022. 15 Years of EIB Green Bonds. https://www.eib.org/en/press/all/2022-308-15-years-of-eib-green-bonds-leading-sustainable-investment-from-niche-to-mainstream#:~:text=On%20July%205th%202007,of%20social%20and%20sustainability%20bonds. Accessed 23 December 2022.

  4. 4.

    EDC. 2017. Green Bond Impact Report: 2, https://www.edc.ca/content/dam/edc/en/non-premium/green_asset_portfolio_reporting.pdf. Accessed 23 December 2022.

  5. 5.

    For more about Ontario’s first green bond issuance, see: Province of Ontario. 2014. Strong Demand for Ontario's First Green Bond. Press Release. https://news.ontario.ca/en/release/30630/strong-demand-for-ontarios-first-green-bond. Accessed 23 December 2022.

  6. 6.

    Ontario Financing Authority. 2022. Province of Ontario Green Bonds. https://www.ofina.on.ca/greenbonds/. Accessed 23 December 2022.

  7. 7.

    CPP Investments. 2018. Canada Pension Plan Investment Board to Issue Green Bonds. https://www.cppinvestments.com/public-media/headlines/2018/cppib-issue-green-bonds. Accessed 23 December 2022.

  8. 8.

    Department of Finance Canada. 2022. Canada Issues Inaugural Green Bond. Press Release. https://www.canada.ca/en/department-finance/news/2022/03/canada-issues-inaugural-green-bond.html. Accessed 23 December 2022.

  9. 9.

    Caroline Harrison and Leah Muething. 2021. North American State of the Market 2021. Climate Bonds Initiative. https://www.climatebonds.net/resources/reports/sustainable-debt-north-america-state-market-2021. Accessed 23 December 2022.

  10. 10.

    Data derived from country-specific data on cumulative issuances made available by the “Climate Bonds Interactive Data Platform,” CBI. https://www.climatebonds.net/market/data/. Accessed 23 December 2022. The CBI data is based on its Green Bond Database Methodology. For more, see: CBI. 2022. Green Bond Database Methodology. https://www.climatebonds.net/files/files/CBI_Method_Criteria_03A.pdf. Accessed 23 December 2022.

  11. 11.

    Ibid. Canada is ranked 10th when issuances from supranational organizations are counted.

  12. 12.

    Harrison and Leah Muething, supra note 9, 15.

  13. 13.

    Ibid. The Royal Bank of Canada (RBC) has issued green bonds denominated in USD, GBP, EUR and AUD. For more information on these issuances, see: RBC. 2022. RBC Green Bond Report: 4. https://www.rbc.com/investor-relations/_assets-custom/pdf/RBC-Green-Bond-Report-2021.pdf. Accessed 23 December 2022. Manulife Financial Corporation issued a 500 million green bond denominated in SDG on November 21, 2017. For more, see: Cision PR Newswire. 2017. Manulife First Life Insurer to Offer a Green Bond. https://www.prnewswire.com/news-releases/manulife-first-life-insurer-to-offer-a-green-bond-657439743.html. Accessed 23 December 2022. Canadian Solar Infrastructure Corporation issued a JPY 3,800 million green bond issuance in January 26, 2021. For more, see: Canadian Solar. 2022. Green Bond. https://www.canadiansolarinfra.com/en/esg/greenbond.html. Accessed 23 December 2022.

  14. 14.

    “Greenwashing” is the act of providing the public or investors with misleading or outright false information about the environmental impact of a company’s products and operations or investments. See further Chapter 6 by Federica Agostini and Elia Cerrato.

  15. 15.

    The Expert Panel on Sustainable finance was mandated by Canada’s federal minister of Environment to provide recommendations on mobilizing finance for sustainable growth, see Minister of Environment and Climate Change. 2019. Final Report—Mobilizing Finance for Sustainable Growth: 28. https://publications.gc.ca/collections/collection_2019/eccc/En4-350-2-2019-eng.pdf. Accessed 23 December 2022. Recommendation 9.1 within the report provides for the convening of key stakeholders to develop Canadian green and transition-oriented fixed income taxonomy. The CSA Group is an independent, Standards Council of Canada accredited not-for-profit membership association serving industry, government, consumers and other interested parties in Canada and the global marketplace. For information on the CSA Group’s work on the taxonomy, see Standards Council of Canada. 2022. Sustainable Finance-Defining Green Taxonomy for Canada. https://www.scc.ca/en/standards/notices-of-intent/csa/sustainable-finance-defining-green-taxonomy-for-canada. Accessed 20 September 2022.

  16. 16.

    For more on the EU Taxonomy, see European Commission. 2022. EU taxonomy for sustainable activities. https://finance.ec.europa.eu/sustainable-finance/tools-and-standards/eu-taxonomy-sustainable-activities_en. Accessed 22 November 2022.

  17. 17.

    See ASIFMA. 2022. Green Taxonomy Survey. https://www.asifma.org/wp-content/uploads/2022/12/final_ey-asifma-taxonomy-survey_report_december-202248.pdf. Accessed 23 December 2022.

  18. 18.

    The GPBs are structured around for pillars—(i) use of proceeds—identifying eligible “green” projects; (ii) process for project selection and evaluation; (iii) management of proceeds-ring fencing or notional equivalent; (iv) and reporting—and have been updated several times to reflect ongoing developments within the green bond space. For the most up-to-date version of the GBPs, see: ICMA. 2021. Green Bond Principles Voluntary Process Guidelines for Issuing Green Bonds. https://www.icmagroup.org/assets/documents/Sustainable-finance/2022-updates/Green-Bond-Principles_June-2022-280622.pdf. Accessed 23 December 2022.

  19. 19.

    For examples of SPOs prepared for Canadian issuers, see: Center for International Climate Research (CICERO). 2017. Second Opinion on Québec’s Green Bond Framework. http://www.finances.gouv.qc.ca/documents/Autres/en/AUTEN_Quebec_2nd_Opinion.pdf. Accessed 23 December 2022. Sustainalytics. 2021. Second-Party Opinion for Choice Properties REIT Green Financing Framework. https://www.choicereit.ca/wp-content/uploads/2021/11/Sustainalytics-Second-Party-Opinion-Choice-Properties-Green-Financing-Framework.pdf. Accessed 23 December 2022.

  20. 20.

    The CBI’s Climate Bonds Standard, for example, provides sector-specific science-based definitions on what types of projects are “green.” For more information, see: CBI. 2022. Climate Bonds Standard V3.0. https://www.climatebonds.net/climate-bonds-standard-v3. Accessed 23 September 2022. Only one Canadian green bond offering has been certified as being aligned with the Climate Bonds Standard by a 3rd party provider. For information on this offering, see: CBI. 2022. Manulife Financial Corporation. https://www.climatebonds.net/certification/manulife-financial-corporation. Accessed 23 December 2022.

  21. 21.

    Source: Percentages calculated from Statistics Canada. Table 36-10-0401-01 Gross domestic product (GDP) at basic prices, by industry (x 1,000,000), https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3610040201.

  22. 22.

    Environment and Climate Change Canada, supra note 15, 28.

  23. 23.

    The CSA taxonomy project was made possible, in part, by the financial support of six Canadian banks, six Canadian Pension funds, four Canadian insurance organizations, an investment dealer and an investment manager. We note that the CSA Group’s intention was that this taxonomy would meet the strategic needs of banks, pensions, wealth and asset managers, insurance companies, rating agencies, regulators, industry associations, individual companies, interest groups, service providers, foundations, endowments, consultants, professional associations, federal and provincial governments and other stakeholders involved in the “green” and “transition” financial products and services ecosystem. Paul Verney. 2022. Canada’s transition taxonomy paused due to fundamental differences of opinion. Responsible Investor, April 25. https://www.responsible-investor.com/canadas-transition-taxonomy-paused-due-to-fundamental-differences-of-opinion/#:~:text=Return%20to%20search-,Canada's%20transition%20taxonomy%20paused%20due%20to%20'fundamental%20differences%20of%20opinion,part%20of%20inaugural%20climate%20strategy. Accessed 23 December 2022.

  24. 24.

    For more see, Environment and Climate Change Canada, supra note 15, 28.

  25. 25.

    Ibid. The Final Report explicitly noted that it found that the precedents emerging concerning the way in which taxonomies were defining projects as “green” were restrictive and could thus “exclude some of Canada’s core economic sectors from certain investment mandates, benchmarks, funds, and accreditation standards—even if companies in these sectors are pursuing projects and strategies that lead to better environmental improvements than approved pure green projects.”

  26. 26.

    CSA Group. 2021. CSA SPE-12000:21—A Canadian guide to transition finance: Principles and taxonomy: 27, https://drive.google.com/file/d/1GlBTwlVMc1WRiNogtrS72H410KOD_B6j/view. Accessed 23 December 2022.

  27. 27.

    Verney, supra note 24.

  28. 28.

    CSA Group, supra note 27, sec. 1.1, 19.

  29. 29.

    Ibid, sec. 4.4, 24.

  30. 30.

    Ibid, sec. 6.2.1, 27.

  31. 31.

    Ibid, sec. 5.0, 25.

  32. 32.

    As a result of the recent additions to the EU Taxonomy, it is argued that the taxonomy is no longer a pure “green” taxonomy. For more information on the inclusion of nuclear and gas activities, see: European Commission. 2022. EU Taxonomy: Commission presents Complementary Climate Delegated Act to accelerate decarbonisation. https://ec.europa.eu/commission/presscorner/detail/en/ip_22_711. Accessed 23 December 2022. The EU Taxonomy classifies a list of environmentally sustainable economic activities with thresholds and metrics and use a technical screening criteria-based approach in doing so. This approach provides detailed thresholds and screening criteria for economic activities and requires compliance with specific objectives. The goal of this approach is to determine whether economic activities are making a substantial contribution to the environment and do no significant harm to other environmental objectives. That being said, the recent classification under the EU Taxonomy of fossil gas and nuclear power as “sustainable investments” challenges the affirmation that the EU Taxonomy is entirely a “green” taxonomy. Within specific sectors, the technical screening criteria approach is intended to be technology-neutral in screening the eligible projects and assets for inclusion and therefore does not predetermine any specific technology or sub-sector activities.

  33. 33.

    CSA Group, supra note 27, sec. 4.4, 24.

  34. 34.

    Ibid, sec. 4.4, 24.

  35. 35.

    This contrasts with, the EU Taxonomy, South Korea’s taxonomy (a.k.a. the K-Taxonomy), and South Africa’s Taxonomy. As an example, Regulation (EU) 2021/2139 sets out technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation or climate change adaptation and for determining whether that economic activity causes no significant harms. For more see: Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the European Council by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation or climate change adaptation and for determining whether that economic activity causes no significant harm to any of the other environmental objectives [2021] OJ L 442/1, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32021R2139&from=EN; National Treasury of the Republic of South Africa. 2022. South African Green Finance Taxonomy. International Finance Corporation. http://www.treasury.gov.za/comm_media/press/2022/SA%20Green%20Finance%20Taxonomy%20-%201st%20Edition.pdf. 23 December 2022. The Korean Green Taxonomy. 2022. The Korean Green Taxonomy (K-Taxonomy) Guideline and its Implications. http://www.koreanlii.or.kr/w/index.php?title=K-Taxonomy&oldid=26139&diff=prev&ckattempt=1. Accessed 23 December 2022.

  36. 36.

    For example, for a renewable energy project core indicators or metrics are usually, annual GHG emissions reduced/avoided in tonnes of CO2 equivalent, annual renewable energy generation in MWh/GWh (electricity) and GJ/T (other energy) and capacity of renewable energy plant(s) constructed or rehabilitated in MW.

  37. 37.

    The SFAC was launched by the Government of Canada in 2021 to bring toegether public and private sector financial expertise to support the growth of a strong, well-functionning, Canadian sustainable finance market.

  38. 38.

    See the report at https://www.canada.ca/en/department-finance/programs/financial-sector-policy/sustainable-finance/sustainable-finance-action-council/taxonomy-roadmap-report.html.

  39. 39.

    The Indian Residential Schools Settlement Agreement dated May 8, 2006, constitute the largest class-action settlement in Canadian history. This Settlement Agreement began to be implemented in 2007. One of the elements of the agreement was the establishment of the Truth and Reconciliation Commission of Canada (TRC) to facilitate reconciliation among former students, their families, their communities and all Canadians. In June 2015, the TRC held its closing event in Ottawa and presented the executive summary of the findings contained in its multi-volume final report, including 94 “calls to action” (or recommendations) to further reconciliation between Canadians and Indigenous Peoples.

  40. 40.

    We note that at this time, only one issuer, Manulife Financial, has sought to certify one of its bonds as being compliant with the CBI Climate Bonds Taxonomy. Canadian issuers appear, in some cases, to make reference to the EU Taxonomy in their communications to investors. For example, the Province of Ontario’s 2021 Ontario Green Bond Newsletter provides that “Ontario funds Green Bond projects that contribute to environmental objectives set out in the EU Taxonomy, primarily in Climate Change Mitigation and Climate Change Adaptation,” see Ontario Financing Authority. 2021. 2021 Ontario Green Bond Newsletter: 3. https://www.ofina.on.ca/pdf/2021_ontario_green_bond_newsletter_en.pdf. Accessed 23 December 2022. This is in line with the GBPs second pillar (process for project evaluation and selection), which recommends that issuer provide information on exclusion criteria, ICMA, GBPs.

  41. 41.

    The International Platform of Sustainable Finance has thus far worked to identify the similarities and differences between the EU Taxonomy and China’s Green Bond Endorsed Projects Catalogue, which culminated in the release of a Common Ground Taxonomy in November 2021 (and updated in June 2022), that ultimately aims to make these two taxonomies more comparable and interoperable. For more, see: European Commission. 2022. International Platform on Sustainable Finance. https://finance.ec.europa.eu/sustainable-finance/international-platform-sustainable-finance_en. Accessed 8 November 2022. We note that the alignment of activities or projects identified as environmentally sustainable with reference to “other taxonomies” has been flagged by the European Economic and Social Committee (“EESC”) as an important aspect for non-EU issuers, as compliance with deviating regulations may result in additional costs and efforts for issuers. For more see: European Economic and Social Committee. 2021. Opinion on the EU green bond standard. https://webapi2016.eesc.europa.eu/v1/documents/EESC-2021-03634-00-00-AC-TRA-EN.docx/content. Accessed 23 December 2022.

  42. 42.

    For example, green bonds from a Canadian issuer might not be included into the portfolio and a green bond fund subject to EU regulation and whose portfolio needs to be aligned with the EU Taxonomy.

  43. 43.

    These ten categories are: (i) renewable energy; (ii) energy efficiency; (iii) pollution prevention and control; (iv) environmentally sustainable management of living natural resources and land use; (v) terrestrial and aquatic biodiversity conservation; (vi) clean transportation; (vii) sustainable water and wastewater management; (viii) climate change adaptation and resilience; (ix) eco-efficient and/or circular economy adapted products; and (x) production technologies and processes and green buildings. For more information on what is included, see: ICMA, supra note 18, 4–5.

  44. 44.

    For example, the Province of Quebec’s Green Bond Framework specifically provides that projects involving fossil fuels or nuclear energy are not “eligible projects,” which the framework defines as projects that “offer tangible environmental benefits for protecting the environment, reducing GHG emissions or adapting to climate change in Quebec.” Minister of Finance. 2022. Quebec Green Bond Framework. http://www.finances.gouv.qc.ca/documents/Autres/en/AUTEN_Green_Bond_Framework.pdf. Accessed 23 December 2022.

  45. 45.

    This is a recommendation under the second core component of the GBPs (Process for Project Evaluation and Selection), which recommends high-level mapping to the SDGs. For more, see: ICMA, supra note 18, 5.

  46. 46.

    This committee generally consists of representatives within the issuer’s organization, and is often comprised of heads of relevant business units, the issuer’s sustainability team and treasury functions responsible for the assessment and selection of their green bond eligible projects.

  47. 47.

    For more, see: ICMA, supra note 18, 8.

  48. 48.

    Ibid.

  49. 49.

    The GBPs recommend that the net proceeds of any green bond offering be credited to a sub-account, moved to a sub-portfolio or otherwise tracked by the issuer in an appropriate manner, Ibid, 6.

  50. 50.

    For example, the Canadian Imperial Bank of Commerce’s (CIBC) Green Bond Framework provides that any portion of the green bond net proceeds that have not been allocated to eligible assets will be invested in accordance with the CIBC Treasury’s existing liquidity management procedures. For more, see: CIBC, Green Bond Framework, March 2020, sec. 2.4, https://www.cibc.com/content/dam/about_cibc/investor_relations/pdfs/debt_info/cibc-green-bond-framework-en.pdf.

  51. 51.

    https://www.oebfa.at/en/financing-instruments/tbills.html. See also ESG commercial paper: the next frontier for sustainable finance? by Dr. Arthur Krebbers—Head of Corporate Climate & ESG Capital Markets at NatWest in the January 2023 Capital Market Data Ltd newsletter at page 8.

  52. 52.

    For example, a given fund might have decided that electrification of transport was the most efficient method of reducing GHG emissions. As such, the issuer’s decision post-issuance to investing only in projects favoring renewable natural gas development (rather than electrification of transport projects) may not align with that fund’s investment strategy.

  53. 53.

    Miguel Almeida and Prashant Lonikar. 2021. Post-Issuance Reporting in the Green Bond Market 2021: 12. https://www.climatebonds.net/files/reports/cbi_post_issuance_2021_02g.pdf. Accessed 23 December 2022.

  54. 54.

    For more on LGX, see: United Nations Climate Change (UNFCCC). 2022. The Luxembourg Green Exchange I Luxembourg. https://unfccc.int/climate-action/momentum-for-change/financing-for-climate-friendly-investment/luxembourg-green-exchange. Accessed 23 December 2022.

  55. 55.

    IAASB. 2013. ISAE 3000 (Revised) Assurance Engagements other than Audits or Reviews of Historical Financial Information. International Federation of Accountants (IFAC). https://www.ifac.org/system/files/publications/files/ISAE%203000%20Revised%20-%20for%20IAASB.pdf. Accessed 23 December 2022. For an example of a reasonable assurance, see: Office of the Auditor General of Ontario. 2021. Schedule of Use of Green Bond Proceeds. https://www.ofina.on.ca/pdf/assurance_audit_nov21_en.pdf. Accessed 23 December 2022. For an example of a limited assurance report, see: The Bank of Nova Scotia. 2021. Green Bond Report. https://www.scotiabank.com/content/dam/scotiabank/canada/en/documents/about/investors-shareholders/funding-programs/2021-Green-Bond-report.pdf. Accessed 23 December 2022.

  56. 56.

    See Part 7 of National Instrument 51–102—Continuous Disclosure Obligations, https://www.asc.ca/-/media/ASC-Documents-part-1/Regulatory-Instruments/2018/10/5931703-v1-51-102-NI-Consolidation-Eff-November-18-2020.ashx and its equivalent in Québec: Regulation 51-102 Respecting Continuous Disclosure Obligations (V-1.1, r. 24), https://lautorite.qc.ca/en/professionals/regulations-and-obligations/securities/5-ongoing-requirements-for-issuers-and-insiders-51-101-a-58-201/51-102-continuous-disclosure-obligations/.

  57. 57.

    ICMA, supra, note 18, 6.

  58. 58.

    ICMA. 2022. Pre-Issuance Checklist for Green Bonds / Green Bon Programmes. https://www.icmagroup.org/assets/documents/Sustainable-finance/2022-updates/Pre-Issuance-checklist-Green-Bonds_June-2022-280622.pdf. Accessed 23 December 2022.

  59. 59.

    ICMA. 2022. Handbook—Harmonised Framework for Impact Reporting. https://d1bf23g64f8xve.cloudfront.net/sites/default/files/downloads/tools/Harmonised-Framework-for-Impact-Reporting-Green-Bonds_June-2022-280622.pdf. For an example of a Canadian issuer that uses the ICMA Handbook, see: Manulife Financial Corporation. 2021. 2021 Green Bond Report. https://www.manulife.com/content/dam/corporate/global/en/documents/pas/MFC_GBR_2021_EN.pdf. Accessed 23 December 2022.

  60. 60.

    For example. the Province of Quebec’s most recent newsletter to investors only provides impact reporting for two out of the six projects financed through green bond proceeds (e.g. subway train and electric bus purchase impact). For more, see: Ministère des Finances du Québec. 2022. Green Bond Newsletter—August 2022. http://www.finances.gouv.qc.ca/documents/Autres/en/AUTEN_MFQ_OblVertes_Bulletin_August2022.pdf. Accessed 23 December 2022.

  61. 61.

    The ISSB is a standard setting body of the International Financial Reporting Standards (“IFRS”) Foundation, and published in March 2022 two exposure drafts—ED/2022/S1 and ED/2022/S2—that were specifically developed in response to calls from primary users of general purpose financial reporting for more transparent, reliable and comparable reporting on sustainability-related financial information to help them more accurately assess an entity’s enterprise value. The two ISSB Exposure Drafts were finalized in June 2023 and now form the basis of the IFRS Sustainability Disclosure Standards that aim to provide a comprehensive global baseline for sustainability and climate-related disclosures that meet the informational needs of investors. For more, see ISSB. 2022. IFRS S1General Requirements for Disclosure of Sustainability-related Financial Information. https://www.ifrs.org/content/dam/ifrs/project/general-sustainability-related-disclosures/exposure-draft-ifrs-s1-general-requirements-for-disclosure-of-sustainability-related-financial-information.pdf. Accessed 23 December 2022. ISSB. 2022. IFRS S2 Climate-related Disclosures. https://www.ifrs.org/content/dam/ifrs/project/climate-related-disclosures/issb-exposure-draft-2022-2-climate-related-disclosures.pdf. Accessed 23 December 2022.

  62. 62.

    EFRAG PTF-ESRS. 2022. [Draft] ESRS 1 General principles Exposure Draft. https://efrag.org/Assets/Download?assetUrl=%2Fsites%2Fwebpublishing%2FSiteAssets%2FED_ESRS_1.pdf. Accessed 23 December 2022. For a criticism of the ISSB proposals, see: Environmental Finance. 2022. ISSB to extend business-as-usual says Mirova’s Zaouati. https://www.environmental-finance.com/content/news/issb-to-extend-business-as-usual-says-mirovas-zaouati.html. Accessed 23 December 2022.

  63. 63.

    ICMA, supra, note 19, 6. In 2021 the GBPs were updated to include key recommendations based on the best practice seen in the market in recent years. It is to be noted that the previous version of the GBPs already recommended that issuer seek external review of their green bonds. In that sense, the 2021 GBPs upgrade simply elevate this recommendation to the level of “key” recommendation.

  64. 64.

    For example, Sustainalytics systematically append this template to its SPO and CICERO (now part of S&P Global) is also appearing to follow this trend.

  65. 65.

    For more, see: ICMA. 2021. Guidelines for Green, Social, Sustainability and Sustainability-Linked Bonds External Reviews. https://www.icmagroup.org/assets/documents/Sustainable-finance/Guidelines-for-GreenSocialSustainability-and-Sustainability-Linked-Bonds-External-Reviews-February-2021-170221.pdf. Accessed 23 December 2022.

  66. 66.

    ICMA, supra, note 18, 6.

  67. 67.

    See for example, Sustainalytics limited assurance review issued for Canadian Imperial Bank of Commerce. Sustainalytics. 2021. CIBC Annual Review. https://www.cibc.com/content/dam/about_cibc/investor_relations/pdfs/debt_info/sustainalytics-2021-annual-review-en.pdf. Accessed 23 December 2022. Sustainalytics also issued a limited assurance review for Manulife. Sustainalytics. 2022. Limited Assurance Statement, May 2022. https://www.manulife.com/content/dam/corporate/global/en/documents/pas/MFC_GB_LAS_2022_EN.pdf. Accessed 23 December 2022.

  68. 68.

    CBI, supra note 20.

  69. 69.

    The post-issuance verification performed by Sustainalytics in relation to Manulife Financial Corporation’s November 21, 2017 issuance of SGD500 million subordinated notes Sustainalytics. 2018. CBI Post-Issuance Verification Manulife Green Bond. https://www.manulife.com/content/dam/corporate/global/en/documents/pas/CBI%20Post-Issuance%20Verification_Manulife%20Green%20Bond_Nov2018.pdf. Accessed 23 December 2022.

  70. 70.

    Existing assurance standards include, for example, ISAE 3410 and ISO 14064-Part 3:2019. For more see: IAASB. 2012. ISAE 3410, Assurance Engagements on Greenhouse Gas Statements. International Organization for Standardization (ISO). 2019. ISO 14064-3:2019 Greenhouse gages—Part 3: Specification with guidance for the verification and validation of greenhouse gas statements.

  71. 71.

    European Commission, Proposal for a Regulation of the European Parliament and of the Council on European Green Bonds COM/2021/391 final, https://eur-lex.europa.eu/resource.html?uri=cellar:e77212e8-df07-11eb-895a-01aa75ed71a1.0001.02/DOC_1&format=PDF. In February 2023 a political agreement was reached between the European Parliament and the European Council on the European Commission's proposal for a European Green Bond Regulation. This political agreement is provisional as it still needs to be confirmed by the European Council and the European Parliament, and adopted by both institutions before it is final. It will start applying 12 months after its entry into force.

  72. 72.

    For ICMA requirements, see: ICMA, supra note 66,”; For CBI, see: CBI. 2019. Climate Bonds Standard and Certification Scheme Guidance for Verifiers Version 2.0. https://www.climatebonds.net/files/files/cbs-guidance-for-verifiers-v2.pdf. Accessed 23 December 2022.

  73. 73.

    TMX. 2022. Sustainable Bonds Portal. https://sustainable-bonds-portal.tsx.com/indicators/global_bonds. Accessed 27 September 2022.

  74. 74.

    TMX. 2022. Green Bonds Dashboard. https://sustainable-bonds-portal.tsx.com/indicators/global_bonds/green_bonds/dashboard_all_public_bonds_greenbond_ind. Accessed 27 September 2022.

  75. 75.

    For more on listing criteria, see: TMX Group. 2020. Thinking of listing fixed income securities on TSX? Here are a few things that you should know,” TMX Toronto Stock Exchange. https://www.tsx.com/company-services/learning-academy?id=433. Accessed 23 December 2022. TSX. 2020. TSX Corporate Manual. Part III. https://decisia.lexum.com/tsx/m/en/nav_date.do. Accessed 23 December 2022.

  76. 76.

    LGX displays over 796 green, social and sustainable securities totalling USD 356 billion, and has an international footprint with 135 issuers from 32 countries, issuing securities in a total of 32 currencies. For more, see: UNFCC, supra note 51.

  77. 77.

    Ibid.

  78. 78.

    For the purposes of our discussion, sovereign issuers include provinces, territories and sub-sovereigns, such as crown corporations (i.e., corporations directly and wholly owned by the federal government or provincial governments within Canada).

  79. 79.

    The Canadian Depository for Securities Limited is Canada's national securities depository, clearing, and settlement hub supporting Canada's equity, fixed income, and money markets. The nominee for CDS is usually CD&Co.

  80. 80.

    Ontario has offered four green bond issues under its domestic MTN program. The most recent issuance was on February 2, 2022, when the Province of Ontario priced a CAD 1.75 billion dollar re-opening of its green bond due November 2029. For more information, see: Ontario Financing Authority. 2022. Ontario 8-Year -$1.7 Billion DMTN CAD Green Bond. https://www.ofina.on.ca/pdf/Feb4_22_DMTN251_en.pdf. Accessed 23 December 2022. Likewise, Quebec has also offered green bonds through its Canadian MTN Program. For more information, see: Minister of Finance. 2022. Green Bond Investor Presentation. http://www.finances.gouv.qc.ca/documents/Autres/en/AUTEN_Green_Bounds_Presentation_PPT_202205.pdf. Accessed 23 December 2022.

  81. 81.

    In Canada, provinces and territories have exclusive jurisdictions on the trading of securities. Consequently, each province and territory of Canada has adopted its own securities law.

  82. 82.

    This includes, the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended, see: U.S. Congress. 1934. United States Code: Securities Act of 1933, 15 U.S.C. §§ 77a-77mm. https://www.loc.gov/item/uscode1934-001015002a/. Accessed 23 December 2022. U.S. Congress. 1934. Securities Exchange Act of 1934. ch. 404, title I, Sec. 1, 48 Stat. 881., https://www.nyse.com/publicdocs/nyse/regulation/nyse/sea34.pdf. Accessed 23 December 2022.

  83. 83.

    Within no-action letters, the SEC typically sets out the conditions upon which such governmental entities can issue securities on a continuing basis within the United States, and includes details on the level of disclosure to be included within that issuer’s prospectus, as well as periodic disclosure required by the issuer. For more, see: U.S. Securities and Exchange Commission. 2022. Staff No Action, Interpretive and Exceptive Letters. https://www.sec.gov/regulation/staff-interpretations/no-action-letters. Accessed 23 December 2022.

  84. 84.

    17 CFR § 230.433, https://www.law.cornell.edu/cfr/text/17/230.433.

  85. 85.

    A free writing prospectus is defined in Rule 405 under the Securities Act of 1933 as “any written communication…that constitutes an offer to sell or a solicitation of an offer to buy the securities” made by means other than a final prospectus, a preliminary prospectus, a written communication made in reliance of Rule 167 or Rule 426 (communication made in connection with certain offerings of asset-backed securities), or any written communication delivered together with the final prospectus, see: 17 CFR § 230.405, https://www.law.cornell.edu/cfr/text/17/230.405.

  86. 86.

    17 CFR § 240.10b-5, https://www.ecfr.gov/current/title-17/chapter-II/part-240/subpart-A/subject-group-ECFR71e2d22647918b0/section-240.10b-5.

  87. 87.

    For a definition of what constitute a regulated market, see: Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (recast) [2014] OJ L 173/349, http://data.europa.eu/eli/dir/2014/65/oj.

  88. 88.

    Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC [2004] OJ L 390/38, http://data.europa.eu/eli/dir/2004/109/oj.

  89. 89.

    Regulation (EU) 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC [2014] OJ L 173/1, http://data.europa.eu/eli/reg/2014/596/oj.

  90. 90.

    For more on LGX listing criteria, see: Luxembourg Stock Exchange. 2022. Displaying bonds on LGQ. https://www.bourse.lu/displaying-bonds-on-lgx. Accessed 23 December 2022.

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    Bruno Caron & Bernard Blouin

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Caron, B., Blouin, B. (2023). Issuing Green Bonds Without a Green Bonds Regulation: Canadian Experiences. In: Ramos Muñoz, D., Smoleńska, A. (eds) Greening the Bond Market . EBI Studies in Banking and Capital Markets Law. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-38692-3_5

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