Ministère des Finances
Ministère des Finances
Ministère des Finances
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.
Green Bonds 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).
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. Therefore, they do not increase the size of the government’s financing program.
Projects funded through 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.
The Québec government’s green bonds are no riskier than conventional bonds. 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 will be made 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.
By issuing green bonds, the Ministère des Finances du Québec wishes to diversify its sources of financing and to be at the forefront of financing trends and to promote new markets. Since the implementation of the Green Bond program, Québec has launched nine Green Bond issues, and has committed to being a regular issuer on this 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 following departments and agency: the MFQ, the Secrétariat du Conseil du trésor, the Ministère de l’Environnement, de la Lutte contre les changements climatiques, de la Faune et des Parcs, the Ministère des Transports et de la Mobilité durable and the Société québécoise des infrastructures.
The GBAC established the broad outlines of Québec’s Green Bond program—the framework–which, among other things, specify the eligibility criteria and describe the detailed process for selecting eligible projects.
The GBAC evaluates and selects projects that are in line with the criteria set out in the “Use of proceeds” section of the Green Bond framework. Precisely, projects that are potentially considered eligible are presented to the GBAC by the relevant partner – the organization which spearheads the project – so that all GBAC members can ask questions. The GBAC then votes for the selected projects to be included or not in the eligible projects pool. The vote needs to be unanimous for a project to be included.
During the funding process, the MFQ decides which projects included in the eligible projects pool by the GBAC will receive funding from a green bond issue.
When developing its program, the Québec government consulted the CICERO Shades of Green, an independent third party. CICERO issued an independent opinion awarding Québec’s Green Bond framework the highest possible rating, dark green, which was confirmed in August 2022.
Please note that this report was produced by Shades of Green. On December 1, 2022, S&P Global acquired Shades of Green from CICERO.
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.
Québec has been a member of the GBP group since October 2018.
As indicated in the framework, eligible projects must belong to one of the following categories:
Excluded are projects linked to:
As for its ninth Green Bond issue, the government expects to fund clean transportation projects, as well as green buildings projects linked to public transit projects. The eligible projects are:
You can find more details on the projects webpage.
Other projects in the eligible categories may also be selected.
As at August 31, 2023, the allocation by project of the proceeds from the Green Bond issues (5.7 billion Canadian dollars) to new financing was as follows:
| Project | Amount ($) | Percentage (%) |
|---|---|---|
| AZUR | 1 259 670 000 | 25.6 |
| REM | 1 199 020 000 | 24.4 |
| Montréal métro’s blue line extension | 710 835 000 | 14.4 |
| Réno-Infrastructures | 484 300 000 | 9.9 |
| Réno-Systèmes | 428 755 000 | 8.7 |
| Accessibility program | 262 900 000 | 5.3 |
| Bellechasse bus garage (LEED) | 210 430 000 | 4.3 |
| Québec city Tramway | 191 106 000 | 3.9 |
| Electric or hybrid buses | 174 088 000 | 3.5 |
| Total | 4 921 104 000 | 100.0 |
The framework of the program, drawn up by the Green Bond Advisory Committee (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, be included in the QIP, and meet the criteria of the Green Bond program selection process to be considered eligible. It should be noted that 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 established in February 2017 a Green Bond program that is credible and transparent, and has negotiated since then nine Green Bond issues, totalling CAN$5.7 billion.
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.
So far, Québec has issued its Green Bonds in Canadian dollars, and plans to continue to do so for the next Green Bond issue.
Québec’s government tracks the allocation of funds to eligible projects. 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 it 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 Green Bonds 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.
Fixed-rate Green Bonds (FRGB) 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 Québec’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 through a Green Bond 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.