David Naftzger and Mike Piskur

November 29, 2021

The Great Lakes and St. Lawrence River are vitally important to North America’s prosperity. These natural resources, shared between Canada and the United States, are a powerful testament to the connection between a healthy environment and healthy economy, as well as the connection between our two countries.

Properly protecting and managing the waters, forests and farmlands of the broader Great Lakes St. Lawrence region is essential to our shared future. Recent weather-related events — from urban flooding to shoreline erosion to western wildfires — underscore the need for new investments, ideas and solutions to address climate change. Also needed are ways to connect these investments with demonstrable outcomes.

At COP26 in Glasgow, a consortium of banks, asset managers and other financial institutions pledged to mobilize more than C$160 trillion in capital “aligned with the Paris Agreement” to transition the global economy toward net zero emissions over the next three decades. Already, more than C$40 trillion in assets have been deployed toward sustainable investment goals. These monies seek to deliver demonstrable environmental and social outcomes beyond a financial return. Achieving ambitious climate goals requires resources of all kinds. Public investment is essential, but innovative financing models are also needed to make transformative investments that cut emissions and boost climate resilience.

The Great Lakes Impact Investment Platform was launched in 2020 to align financial opportunities with environmental improvements in the Great Lakes St. Lawrence region. In Ontario and Québec, and across the region, a diversity of forward-looking organizations —from public utilities and governmental agencies to small businesses and nonprofits — are using impact investment and sustainable finance to fund needed improvements, reduce climate risk and save money.

The most powerful examples result in demonstrable, quantifiable improvements and are designed to help communities prepare both for today’s challenges and for longer-term impacts and uncertainty. Innovative financing can bolster existing efforts that are already driving impactful investment in the U.S. and Canada, and open new opportunities.

Collectively, these projects have saved 14 million kilowatts of energy, protected approximately 1,700 hectares of forest and farmland and saved 170,000 litres of water, among other benefits.

To that end, the Conference of Great Lakes St. Lawrence Governors & Premiers (GSGP), a partnership of the chief executives of eight US states, Ontario and Québec, led development of the Platform to showcase regional projects aiming to deliver environmental benefits alongside financial returns. It also positions the Great Lakes St. Lawrence region as a global destination for investments that increase climate resilience, reduce emissions and more. The impacts delivered by projects align with global initiatives such as the UN Sustainable Development Goals (SDGs).

The Platform has already been a huge success, featuring more than three dozen projects totaling more than CA$5 billion from around the region. Collectively, these projects have saved 14 million kilowatts of energy, protected approximately 1,700 hectares of forest and farmland and saved 170,000 litres of water, among other benefits. This includes several major projects in Canada. For example, green bonds issued by the Ontario Financing Authority, Québec Ministry of Finance, and the City of Toronto are funding projects intended to deliver energy efficiency gains, emissions reductions, and flood protection.

The growth and maturation of green bonds represent a major, near-term opportunity for provinces and cities to drive needed investment in environmental sustainability. Recent analysis of green municipal bonds in the Great Lakes region, commissioned by GSGP, finds that public bond issuers in the region can lower their borrowing cost by using green bonds. The green bond premium or “greenium” enables these issuers to save up to 23 basis points compared to conventional bonds, based on yield spreads in the primary bond market. Investors are increasingly willing to take a discount for green bonds tied to demonstrable environmental outcomes — creating taxpayer and ratepayer value while financing needed improvements.

The emergence of a “greenium” is clear evidence that aligning investment decisions with environmental improvements is a winning strategy for government and business. And it’s only the beginning. Just as green bonds require the issuer to describe the kinds of projects and outcomes that will be funded, public and private entities are increasingly expected — and required — to show how investments and business strategies align with environmental risks and impacts. These trends are expected to grow in the coming years until they become standard practice.

The region can take advantage of impact investment to help make progress on climate goals while making communities more resilient and prosperous. Stronger connections between investments and environmental outcomes can create tremendous opportunities.

For more information, visit www.greatlakesimpactinvestmentplatform.org.

David Naftzger is Executive Director of the Great Lakes St. Lawrence Governors & Premiers. Mike Piskur is Program Manager for the Great Lakes St. Lawrence Governors & Premiers.