First green bonds issued for public infrastructure in Canada

Two hospitals on the east side of Vancouver Island are the first Canadian public infrastructure project to be funded by green bonds.

While they are similar to traditional bonds, green bonds are raised exclusively for projects with environmental benefits. They are used to fund buildings, water and wastewater infrastructure, and renewable energy.

A consortium known as Tandem Health Partners, which includes Stantec Consulting, issued a 32.3-year bond to finance the North Island Hospitals Project. The project involves two new acute care hospitals, one in Campbell River and the other in the Comox Valley. The green bond issue raised $231.5 million and was oversubscribed by investors that included insurance companies and fund managers.

Green bonds were first introduced in 2008 by the World Bank, since when the market has grown and is expected to reach $25 billion in 2014.

Some private sector renewable energy projects have been funded in Ontario and Quebec, but the North Island Hospitals Project green bond is the first green bond for public infrastructure in Canada and the first for a public-private partnership project in North America. The B.C. Government says that the North Island Hospital Project issue by Tandem “allows B.C. to provide leadership in a new and emerging green bond market in Canada. The Province of Ontario plans to launch a multi-year green bond program this year.

To be assessed as suitable for green bond issuance, the North Islands Hospitals Project was assessed as green by Altus Group. The B.C. government set the technical criteria, which included LEED gold certification, energy and greenhouse gas targets, and the B.C. Climate Action Plan as a foundation. The project meets the global principles for green bonds which were established in January 2014 by a consortium of international banks.

Tandem Health Partners was selected from three shortlisted proponents for the North Islands Hospitals Project in April. The consortium negotiated with Island Health and settled on a fixed-price contract to design, build, partially finance and maintain the new hospitals. The total cost of the hospitals is $606.2 million.

Besides Stantec, Tandem Health Partners includes Graham Design Builders, Farmer Construction, Blue Cottage Consulting, Balfour Beatty Investments, Gracorp Capital Advisors, Connor Clark & Lunn GVest and Honeywell International.

For more information about the North Islands Hospitals Project, click here.