Blog - October 22, 2021

Green Bonds & Ham

The Federal government announced plans to issue $5 billion of “green” bonds as part of it’s 2021 budget.

Governments issuing bonds isn’t usually something that would spark many conversations; it happens every week. So, what’s the difference here?

Ethical investing or ESG has primarily been led by the equity side of the markets. Investing in companies that are better actors or are trying to solve environmental and social issues has become quite common. What has been slower to catch on is ESG-focused lending. The Canadian government is trying to expand a small market by issuing bonds whose proceeds will go directly towards financing climate and environmental protection initiatives.

Green bonds are a relatively new concept in North America but have been popular in Europe for a decade. Most North American green bonds are issued by companies and not governments. Government bonds are typically safer and higher-quality than bonds issued by companies because governments have more methods to generate income, such as through taxation.

As an investor, there is a place in your portfolio for this high-quality debt. Though it’s usually of a lower yield or interest rate, these bonds can provide more stability during volatile markets. Having a greater number of ethical investment choices helps build a portfolio with better diversification and lower risk. It also gives an ethically-minded investor confidence that the debt they’re buying isn’t going to subsidize oil companies but rather will support targeted efforts by the government to meet its environmental goals.

The government borrowing money to finance its activities isn’t anything new but giving investors a way to participate in the debt issuances of the country and directly support its green activities help further mature the market for ethically-minded investors.

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