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Green Bonds

Green bonds – Frequently asked questions (FAQ)

Québec's Green Bonds are debt instruments issued to borrow capital that is then allocated to specific projects that generate tangible benefits for the environment.

Québec's Green Bonds have the same characteristics as conventional bonds in terms of price, yield, maturity and credit ratings are concerned.

Green Bonds simply have some additional administrative requirements, such as the inclusion in the legal documentation of a section on the use of proceeds, the commitment to periodically inform investors of progress on, and disbursements under, projects funded by the bonds, and, ideally, the disclosure of information on the project's environmental benefits (impact reporting).

No. Green Bonds are valid bonds of Québec and rank pari passu with each other and with all other debt issued by Québec. The payment of principal and interest on the notes is a charge on and payable out of the Québec Consolidated Revenue Fund. Holders of these bonds do not assume any project-related risks.

The credit ratings of these Green Bonds are the same as for any other bonds issued by Québec.

No. These bonds are not an additional source of financing for Québec. They are simply another means of financing borrowings that would have been financed by a conventional bond. They therefore don't increase the government's financing program.

Projects funded by Green Bonds are selected from those identified in the Québec Infrastructure Plan (QIP) or have been approved by the government and are already taken into account in its financial framework. Québec's Green Bonds therefore have no impact on debt reduction targets.

Besides seeking to diversify its sources of financing, the Ministère des Finances du Québec wishes to be at the forefront of financing trends and to promote new markets. To this end, Québec has put in place a Green Bond program. Since then, Québec has launched four Green Bond issues, and has committed to be a regular issuer on the Green Bond market. Québec thereby demonstrates its commitment not only to developing the Green Bond market, but also to protecting the environment.

The Ministère des Finances (MFQ) formed the Green Bond Advisory Committee (GBAC), which is comprised mainly of representatives from the MFQ, the Secrétariat du Conseil du trésor, the Ministère du Développement durable, de l'Environnement et de la Lutte contre les changements climatiques, and the Ministère des Transports, de la Mobilité durable et de l'Électrification des transports.

The GBAC established the broad outlines of Québec's Green Bond program—the framework and selection process–which, among other things, specify the eligibility criteria and describe the detailed process for selecting eligible projects.

The GBAC determines the eligibility of green projects using the categories specified in the framework. It then chooses projects that meet the Green Bond program selection criteria.

When issuing Green Bonds, the MFQ selects projects from the list drawn up by the GBAC.

The Québec government consulted the Center for International Climate Research (CICERO), an independent third party, when developing its program. CICERO issued an independent opinion awarding Québec's Green Bond program the highest possible rating, dark green.

The government's Green Bond program also draws on the core guidelines of the Green Bond Principles (GBP), one of whose objectives is to improve transparency in this growing market.

As described in the framework, eligible projects must be in one of the following categories (excluding electricity generation projects requiring the use of fossil fuels and nuclear energy):

  • Public Transit
  • Energy Efficiency
  • Renewable Energy
  • Sustainable Waste Management
  • Sustainable Land Development
  • Water Management or Water Treatment
  • Forest, Agricultural Land and Land Management
  • Climate Adaptation and Resilience

Yes. As for its three first Green Bond issues, the government expects to fund public transit projects. The projects identified are the Reseau express métropolitain (REM), the renovation of various Montréal métro systems and infrastructures and the purchase of hybrid bus. Other projects in the eligible categories may also be selected.

The framework of the program, drawn up by the GBAC, specifies that only projects included in the Québec Infrastructure Plan (QIP) are eligible, or in order for a project not included in the QIP to be exceptionally eligible, it must have been approved by the government and already be taken into account in its financial framework. Projects that are selected by the GBAC for Green Bond funding would otherwise have been funded by a conventional bond. Accordingly, the GBAC cannot accept direct submissions from the public. Government departments and bodies can propose projects, but these must already have been approved by the government and be included in the QIP, and must meet the criterias of the Green Bond program selection process, in order to be eligible. An “eligible” project will not necessarily be funded by a Green Bond, and may be funded instead by a conventional bond. In short, a project included in the QIP will be funded in any case, whether by a Green Bond or a conventional bond.

The Québec government is a regular issuer on the Green Bond market. Accordingly, it has established in February 2017 a Green Bond program that is credible and transparent, and has negociated since then four Green Bond issues.

Québec's Green Bonds are part of the government's annual borrowing program and, like the government's other bonds, are therefore issued on the basis of demand and borrowing costs, for the purpose of diversification, whether on the domestic market or international markets.

In terms of size and execution, the Québec government issues its Green Bonds according to market standards, as is the case with its conventional bonds.

For its next Green Bond issue, the province also plans to issue the bonds in Canadian dollars on the global market.

Yes. An amount equal to the net proceeds from the Green Bond issue is credited to a designated account, in order to track the use and allocation of funds relating to eligible projects. As long as the account has a positive balance, amounts equivalent to the funds disbursed are deducted from this balance as they are allocated to eligible projects approved under Québec's Green Bond framework.

Until further disbursement, the unallocated balance is invested, in the short term, in Treasury bills or short-term notes guaranteed by the Québec government or another Canadian government.

Québec GBs are issued on the bond market and are intended for institutional investors such as money managers, pension funds, insurance companies and other Canadian and international bond buyers.

FRGBs are issued by Épargne Placements Québec and are intended for the retail market, specifically for the savings needs of individual Quebecers.

FRGBs are a new source of funding for Quebec's Green Bond Program. The sums collected from the sale of FRGBs will therefore be channelled to one or more projects already identified as being eligible for financing via a GB issue. This way, Quebecers can be sure that their savings contribute to projects with tangible benefits for the environment in Québec, and which will be subject to reporting.