New Ontario green bonds could be a gamechanger

The Premier of Ontario recently announced that Ontario plans to create green bonds to finance “environmentally friendly infrastructure projects” across Ontario. GallonDaily suggests that these bonds could be a gamechanger in the financial services sector but only if the Province designs the program properly.

Why a gamechanger?

Ontario residents, like those of most other Canadian provinces and US states, have shown that they are eager to participate in environmental initiatives where they can provide helpful input with little or no disruption to their lives which they often already perceive as hectic. The high participation rate in Ontario Blue Box recycling is just one of many examples. Moving some of one’s savings to green bonds is even easier than recycling through the Blue Box. If the program is designed correctly, then it is likely that millions of Ontario residents, and potentially some from other provinces as well, will move some of their savings and investments to the new green bonds, potentially causing the size of the green bond fund to greatly exceed government projections, whatever they are. If this happens, movement of investment from conventional savings and investments to green bonds is likely to cause banks and other financial service companies to introduce green investment vehicles of their own. This could be a real boost to the greening of all kinds of capital projects, not just those that fall under provincial government jurisdiction.

What are the risks?

Unfortunately, government does not always get new initiatives designed and implemented properly. We have no way of knowing at this stage whether the government will design the green bond program in a way that makes it attractive to individual investors. The initial announcement of the project is already confused. In the first paragraph, and in quotes in the press release from the Premier and the Minister of Finance, the green bonds are announced as being for transit, something that is not likely to attract a ton of public interest outside of Toronto. Even in Toronto transit is a highly controversial topic with proponents of the different modes (subway, light rail bus, etc.) battling it out at every opportunity.

The premier says that the province plans to issue green bonds next year, subject to the passage of legislation and the receipt of certification. That is a pretty fast, though not impossible, timetable for designing the program. It reminds us of the Ontario government’s Green Energy Act, introduced too fast and with far too little consultation, it remains a highly controversial program to this day. The government, in a minority position in the Legislature, may face an election following a possible defeat of the budget in the Spring. this would presumably delay or kill the green bond program. Environment Minister Jim Bradley, currently the longest serving member of the legislature and a pretty astute politician, told GallonDaily recently that he is sure that the Ontario election will not come until 2015, but even Jim Bradley could be wrong.

How should the program be designed?

GallonDaily sees the following as being among the elements that are essential for a successful Ontario green bond program:

  • a competitive rate of return. If the bonds provide a lower rate of return than other government investments, people will decide to keep their savings in higher rate instruments.
  • a government guarantee at least as good as provided to other government savings bonds. Maybe even slightly better than, given that green bonds are an investment vehicle new to Canada.
  • a clear plan showing how the promised rate of return will be achieved throughout the life of the bonds.
  • clearly green. There are ways in which even public transit projects can be designed so as not to be green. Low potential ridership is one of these. The funds from the green bonds must be used only for projects which the vast majority of the population sees as being green.
  • absence of controversy regarding the green status of the bonds. Using green bond capital for such projects as nuclear power plants or energy from waste plants would introduce a level of controversy that would scare away many investors. There is no evidence that this will happen, but, where politicians are involved, one never knows. Even if just one of the opposition parties were to say that if it came to power it would use green bond funds for a controversial project such as one of these, that alone may be enough to scare off lots of individual investors.
  • the right balance between management expenses and investment in projects. In recent years there has been much controversy in Ontario about the salaries paid to executives in publicly funded organizations. Couple that with public outrage regarding salaries paid to bank executives and the potential for big disaster looms.
  • absolute transparency. Everything the green bond board does, from salaries to expenses to assessment of investment opportunities and investments, must be included in information made available to the public. In GallonDaily’s 25 years of experience, green consumers are much more critical observers of the organizations that they deal with than mainstream members of the public. These people will put Ontario green bonds under a very high power magnifying glass.
  • good marketing. Most people do not know much about green bonds. A program of education will be essential. Governments used to excel at leading the public but today excellence in leadership seems too often to be lacking. If the bond funds are to be used for such essential projects as renewal of crumbling underground infrastructure (water and sewer mains, for example) then good public education and marketing will be essential because many residents know very little, if anything, about these serious environmental problems and may not see them as environmental priorities.
  • independence from political interference. In GallonDaily’s opinion, the green bond program and decisions about fund investments should be made by an arm’s length board of qualified experts, not by the provincial Cabinet. In today’s society it is difficult to know who is most trusted but politicians do not often come close to the top of the list. A board of experts from various sectors, environment, economic development, and finance, among others, will likely have greater credibility than a board made up of politicians from the governing party.

GallonDaily invites your comments on this article, possibly including your thoughts on what it would take to encourage you to invest in Ontario green bonds. Please send them by responding through the leave a comment button below or by email to . We will publish a selection of those received in Gallon Environment Letter.

The Ontario Premier’s brief announcement about the forthcoming green bond program is available at



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