Canada Pension Plan Investment Board Issues Euro Green Bonds

€1 billion 10-year fixed-rate notes are issued to invest in renewable energy.

The CA$368.3 billion (US$281.2 billion) Canada Pension Plan Investment Board (CPPIB) issued its first euro-denominated green bond with the sale of €1 billion ($1.15 billion) in 10-year fixed-rate notes that will enable it to invest in assets such as renewable energy, and water and real estate projects.

“The European market for green bonds is robust and gaining even more traction amid changes such as the EU’s increased targets for how much of the region’s consumed energy comes from renewable sources,” Poul Winslow, CPPIB’s global head of capital markets and factor investing, said in a release. “The capital raised will help finance our expanding portfolio of eligible green assets and demonstrate how we integrate environmental considerations into our investment decisions.”

Among the green bond-eligible investments recently made by CPPIB is a joint venture in renewable power and offshore wind assets. In 2018, CPPIB acquired 49% of energy transportation company Enbridge’s interests in two German offshore wind projects, as well as a 49% stake in some of Enbridge’s North American onshore wind and solar assets.

In June, CPPIB was the first pension fund to launch a green bond as investors bought CA$1.5 billion of a Canadian dollar-denominated 10-year bond. 

CPPIB’s “Green Bond Framework” defines the following three categories as eligible for investment from green bond proceeds:

  • Renewable Energy (wind and solar)
  • Sustainable Water and Wastewater Management
  • Green Buildings (LEED Platinum certified)

Green bonds support environmental, social, and governance (ESG) projects,  are tax exempt, and can provide tax credits. To qualify as green bond, the bonds must be verified by a third party, such as the Climate Bond Standard Board. The CPPIB’s Green Bond Framework has been evaluated by the Center for International Climate Research (CICERO), which provides second opinions on the qualification of debt for green bond status.

According to CPPIB, the annual issuance of green bonds reached CA$155 billion in 2017, a 78% increase from 2016. It also said annual issuance is expected to reach CA$250 billion to CA$300 billion in 2018, and increase to CA$1 trillion by 2020, according to the Climate Bonds Initiative, an investor-focused not-for-profit organization.

The green bonds offered by CPPIB have not been, and will not be, registered under the US Securities Act of 1933, or the Securities Act, and were offered or sold within the US only to “qualified institutional buyers.”

Tags: Canada Pension Plan Investment BoardESGEuroGreen Bond
By Michael Katz