Canada’s CPPIB to become world’s first pension fund to issue green bond

Canada Pension Plan Investment Board (CPPIB) will become the first pension fund in the world to issue a green bond.
The C$356bn (€232bn) body, which invests on behalf on the Canada Pension Plan, will issue an undisclosed number of green notes in a private placement, to finance its own investments in wind, solar, sustainable water and wastewater management and energy efficient buildings.
The transaction is part of wider bond issuance from CPPIB over recent years, which it undertakes to enable it to diversify its portfolio without missing its risk targets. The AAA-rated investor has raised around $13bn since it began issuing, and is approved to borrow between $7bn and $10bn through long-term debt securities in 2018. This will include “the issuance of a total of 3-4 liquid benchmarks across US dollars, Euros and possibly CAD”, it states on its website, adding that it would also explore sterling issuance. CPPIB can issue shorter-dated, non-benchmark notes too, if there is investor demand. The terms of the green bond have not been disclosed.“The issuance of green bonds is a logical next step to CPPIB’s investment-focused approach to climate change,” said Poul Winslow, Senior Managing Director & Global Head of Capital Markets and Factor Investing. “The capital raised will help support strong, long-term investments in eligible green assets that position the fund for continued success.”

CPPIB is accountable to Canada’s Parliament, but is managed independently and its debt is not guaranteed by governments.
Winslow added that it was “pleased to be a pioneer amongst pension funds” by becoming the first to sell a green bond. Pension funds around the world – particularly in North America – have together issued some $30bn of conventional bonds since 2014. CPPIB is one of the most active issuers in the market, but fellow Canadian pension plan Ontario Teachers’ also issues bonds and invests in climate-related assets, making it a potential candidate to follow CPPIB’s lead.
CPPIB plans to invest more than C$3bn in renewables alone, saying this will help it to ensure it is “well-positioned for the expected global transition to a lower-carbon economy”.