Telus Corp. is the first B.C. company to issue a green bond to help finance construction of an office tower.
In partnership with developer Westbank, Telus (TSX:T) issued $225 million in green bonds to retire short-term construction financing for Telus Garden – its new $750 million, energy-
saving headquarters in downtown Vancouver.
“This is the first time in North America that green mortgage bonds have been used to support real estate financing,” said Andrea Goertz, Telus’ chief communications and sustainability officer.
It might not be the last, but analysts say that any developer wanting to pursue a similar deal would need a partner with deep pockets to attract bond investors.
According to the U.K.-based Climate Bonds Initiative (CBI), US$14 billion in green bonds were issued globally in 2014, and the CBI estimates that up to US$100 billion could be issued this year to support sustainability initiatives around the world.
Green bonds make it easier for organizations to fund projects they believe will deliver environmental benefits. Green bond proceeds fund green initiatives exclusively and require transparency so investors can see that the money is being used for sustainability-driven projects.
In Canada, the green bonds market is in its infancy but is growing fast.
Sustainable Prosperity, an Ottawa-based green energy think-tank, reports that Canadian green bonds rocketed from zero to $1.2 billion in the past year.
Last year, there were three green bond issues in Canada: by the Ontario government to fund light transit, by Export Development Canada (EDC) to fund renewable energy, recycling and public transit projects and by TD Bank Group to fund its environmental initiatives. All three were oversubscribed, which indicates the potential demand.
TD’s green bond offered a yield of 1.82%, compared with 0.87% for the EDC and Ontario government green bonds. The privately placed Telus green bond was issued in July as a 3.4%, 10-year bond that will mature on July 22, 2025. The green bond issue includes senior notes secured by the environmentally and technologically advanced Telus Garden tower. It was completely subscribed.
Alex Wood, senior director of policy and markets at Sustainable Prosperity, said the explosive growth of green bonds in Canada shows that they’re now mainstream investments.
“Three years ago, bonds labelled as ‘green’ or ‘climate’ were a niche market pioneered by a handful of [international] development banks such as the World Bank and International Finance Corp.,” Wood said. “This has now changed. We are seeing a whole new class of institutional and private investors coming into this space. Many are investors who understand the bond market but have never considered green bonds, while others are traditional green investors who have never before considered bonds.”
Telus Garden meets green requirements: it includes a 22-storey office tower built to Leadership in Energy and Environmental Design (LEED) Platinum specifications – the highest LEED rating – as well as a LEED Gold 47-storey residential tower. •