Canada Launches Second Green Bond Offering, Adds Nuclear Power to Eligible Investment Categories

The Government of Canada announced that it will issue its second green bond this week, aimed at unlocking financing to accelerate green infrastructure and nature conservation projects, and supporting the achievement of the country’s climate goals. According to media reports, the new offering will aim to raise $4 billion through the issuance of 10-year notes.

The new offering follows Canada’s inaugural $5 billion green bond issuance in March 2022. According to the most recent green bond allocation report, issued in April 2023, more than a third of the proceeds were directed towards investments in “Clean Transportation,” including initiatives and projects supporting the adoption of zero-emission vehicles (ZEVs) and the deployment of ZEV infrastructure, such as charging stations. Other top allocation categories included “Living Natural Resources and Land Use,” with funding to support sustainable farming practices and to encourage the development of innovative technologies that will reduce GHG emissions in the agricultural sector, and “Renewable Energy.”

Prior to launching the new offering, Canada updated its Green Bond Framework, outlining the areas of eligible expenditure for the offering’s proceeds, as well as the process used for project evaluation and selection, and allocation and impact reporting obligations.

One of the most significant updates to the framework was the addition of some nuclear energy expenditures in the list of eligible investment areas, making Canada the first to do so. The inclusion of nuclear activities has been included in the sustainable finance taxonomies in jurisdictions including the EU and the proposed UK taxonomy, although it proved controversial in the former, with some member states, and the European Commission’s own sustainable finance advisory group opposed to its inclusion, noting problems including potentially adversely affecting other sustainability objectives and potential long-term problems from managing nuclear waste.

The framework lists the deployment of nuclear energy to generate electricity and/or heat under the eligibility category of Clean Energy. Additional eligible categories for allocation of green bond proceeds under the framework include Clean Transportation, Living Natural Resources and Land Use, Energy Efficiency, Terrestrial and Aquatic Biodiversity, Climate Change Adaptation, Sustainable Water and Wastewater Management, Circular Economy-Adapted Products, Production, Technologies, and Processes, and Pollution Prevention and Control.