The Canada Pension Plan Investment Board (CPPIB), a public pension fund, has announced its foray into green bonds. This would make CPPIB the first pension fund to issue green bonds, according to the board.
Many professional investment companies are now looking to diversify their portfolios, and investment in renewable assets has emerged as an attractive bet as the sector is rapidly expanding.
These green bonds will help CPPIB secure additional funding as it increases its holdings in renewables and energy efficient buildings in the face of increasing global demand.
“The issuance of green bonds is the logical next step to CPPIB’s investment-focused approach to climate change, and we are pleased to be a pioneer amongst pension funds in this regard,” said Poul Winslow, the senior managing director at CPPIB, in a media statement. “The capital raised will help support strong, long-term investments in eligible green assets that position the fund for continued success.”
In the last year, CPPIB has announced investments worth more than $3 billion in the renewable energy sector. It has defined three categories for eligibility to receive investment through its green bonds: renewable energy (wind and solar), sustainable water and wastewater management, and green buildings.
CPPIB has been an active investor in India’s renewable energy sector. For instance, in January 2018, CPPIB acquired a 6.3 percent stake in Indian renewable energy project developer ReNew Power from the Asian Development Bank (ADB) for $144 million.
CPPIB was also set to invest approximately $200 million (~₹12.9 billion) in ReNew Power Ventures in the form of compulsory convertible preference shares (convertible debt) that will convert to equity shares at the time of an initial public offering.
The market for green bonds has witnessed continuously increasing activity in recent times. Since their introduction in 2007, they have become mainstream in the financial community. With the annual issuance reaching $155 billion in 2017, green bonds had a 78 percent increase over 2016.
Recently, Bank of America announced a $2.25 billion green bond to support clean energy projects.
Mercom recently reported that Sindicatum Renewable Energy, a Singapore-headquartered renewable energy company, raised nearly $39.3 million through the sale of rupee-denominated international green bonds.
In December 2017, the Indian Railways Finance Corporation (IRFC) also announced that it raised $500 million through the issuance of its first green bond on the London Stock Exchange’s International Securities Market.