Bruce Power LP announced a C$500 million ($395.6 million USD) bond sale on Thursday after holding meetings this week to discuss its green financing framework, which includes reaching net-zero emissions by 2027. Under the ICMA Green Bond Principles, the use of proceeds is one of the most important aspects of sustainable financing. In this case, Bruce Power plans to use proceeds from the bond sale to help fund an overhaul of nuclear reactors, a decision that will challenge many sustainable debt investors.
Why is this a challenge for sustainable debt investors?
Allocating proceeds for nuclear power has been under debate due to concerns about waste disposal, potential weapons proliferation, and the chance of accidental radiation, which can have devastating consequences. The other side of the debate is how nuclear power can help transition from brown to green.
Aaron Young, who has a deep understanding of sustainable finance, offered our view on this debate:
“Nuclear can act as the bridge between the phase-out of high carbon/low-cost electricity sources (coal, natural gas) and the scaling of renewables over time to become the dominant, reliable source of electricity in the future. Because waste management poses an important ecological and social risk for any nuclear operation, we think the market has to be selective in choosing from which jurisdictions Green bonds are issued with the use of proceeds linked directly to nuclear power generation.” – Aaron Young, Associate Portfolio Manager – ESG
What does this mean for Bruce Power’s issuance?
Ryan Vaughn, who focuses on the energy sector, commented on the deal and its significance on the article published by Bloomberg:
“This deal will definitely be an interesting one to watch as nuclear is the subject where we see ESG-focused investors most split…. [At RPIA,] we view nuclear as a transition technology which poses higher ecological risks versus renewables, but that has an important role to play in the global path to net-zero.” – Ryan Vaughn, Portfolio Manager – Energy Sector
Bruce Power currently produces 30% of Ontario’s energy and, as a result, plays a vital role in our national pathway to net-zero. This will be an interesting space to watch as the European Union, the global leader on green financing, is weighing the inclusion of this particular use of proceeds in its green rulebook for investments.
Click here to read the full Bloomberg article