Maybe the Canadians will show them.

In the same week Standard & Poor’s released a report on the development of the U.S green bond market, which lags the rest of the world, Toronto Dominion Bank revealed plans for a US$500 million raise via a senior green bond offering.

The offering, announced Thursday morning and priced later in the day, is noteworthy for two reasons. First, the deal was quickly upsized to US$1 billion and second, it marked the first time that TD has issued a green bond in the U.S.

In going to the U.S., TD Bank followed the lead of the Export Development Corp., the first Canadian entity into that market. In January 2014, EDC raised US$300 million; since then it has completed a US$300 million raise (December 2015) and in May 2017, a US$500 million funding. (Ontario has also completed a US$500 million green bond offering in the U.S.) One week back, EDC entered the Canadian market for the first time with a $500 million raise for five years at 1.80 per cent.

Now TD is going the other way, given that in 2014 it became the first Canadian commercial bank to issue a green bond in the domestic market when it raised $500 million from a three-year offering.

Low-carbon economy

Proceeds from that issue were used to support North American projects that contribute to the low-carbon economy through either renewable energy generation, or energy efficiency and management, or green infrastructure and sustainable land use.

So how did it do? TD published the use of proceeds with the bulk ($234 million) being used for building efficiency; $130 million was invested in transportation efficiency; and $59 million was invested in wind energy. The bank also referenced a $53 million investment in Toronto’s Bay Adelaide Centre — a building that “will feature best-in-class operational environmental and life-safety systems” — and a $20 million investment in a wind farm on Manitoulin Island.

TD takes its responsibilities seriously. For instance, it’s a signatory to the green bond principles, a set of global standards that promote integrity in the green bond market.

The proceeds of the offering are also placed in a segregated portfolio until allocated while an accounting firm provides an annual assurance on the allocation and reporting of proceeds to eligible projects.

Apart from TD, two provinces — Ontario (which used the proceeds to help fund the development of a subway line in Toronto) and Quebec — and at least one private public partnership (BC’s Tandem Health Partners) have issued green bonds. Earlier this year, a report indicated that Canadian issuance could top $50 billion annually.

South of the border, the market has “remained relatively small,” according to the S&P report, which noted that US$36 billion has been issued this year, split equally between corporations and municipalities. To put that US$36 billion into perspective, at the end of June on a global basis US$221 billion has been issued and remains outstanding.

So what’s behind the slow rate of progress in the U.S., home to about one-quarter of the world economy?

S&P contrasted the U.S. situation with Europe, which has “long benefited from a transparent and enduring carbon reduction framework.” In the U.S. at the federal level, debates on climate-change mitigation have been characterized by “partisan disagreement.” That politicization of climate change has ultimately slowed progress toward a successful resolution,” added the report.

And with a commander in chief who says climate change is a “hoax” invented by the Chinese, that lack of progress continues. The report noted the situation isn’t helped by the rollback of the Clean Power Plan this year and uncertainties regarding the incentives for solar power development. Offsetting those negatives are developments at the state level.

Financial Post

bcritchley@postmedia.com