Use of a Green Bond by the City of Vancouver for Adaptation

In September of 2018 the City of Vancouver introduced the Green Bond Program in order to better facilitate the funding of environmentally sustainable projects and programs and address local climate change impacts such as sea level rise and severe heat waves. The Green Bond Program was created by Vancouver City Council in order to compliment and provide additional financial support to projects and programs which support the city’s Renewable City Strategy. The City of Vancouver is a leader in sustainability and derives much of its electricity from renewable sources. The Green Bond Program is another trail blazing effort on the part of the city, becoming one of only three such programs offered by a Canadian city (the others being the City of Toronto and the City of Ottawa). The program offers $85 million Canadian dollars in bonds with a maturation date of 2028. Payment of capital and interest of green bonds are made from the city’s general sinking fund debentures who’s 2011-2021 offering is $140 million. All proceeds from bond sales will be used towards capital projects that are deemed to have a positive benefit to the environment. Eligible project categories include (but are not limited to) initiatives which address renewable energy, energy efficiency, green buildings, and clean transportation. To date, the program has funded projects such as the redevelopment of Roddan Lodge affordable housing incorporating green building principles, and sewer and water main reconstruction in order to increase flood resilience and improve service levels.

Understanding and Assessing Impacts

While the Green Bond Program itself does not elaborate as to the identification of climate change impacts on the City of Vancouver, the host of climate change related documents produced by the city in recent years provides a wealth of insight into the topic. Through their Climate Change Adaptation Strategy Vancouver has identified three areas of concern: hotter, drier summers; warmer, wetter winters; sea level rise. Much of the information related to these impacts was compiled through observation of currently experienced impacts as well as through climate projections provided by the International Panel on Climate Change. The city has experienced a host of climate change related impacts in the past decade including coastal flooding, poor air conditions due to wildfires, and drought conditions. Vancouver has opted to utilize these future projections rather than historical data. In doing so, the City of Vancouver downscaled the projections in order to better tailor them to a local context. Aside from the use of climate projections, Vancouver has also undertaken broad vulnerability and risk assessments. These assessments also led to the creation of a Coastal Flood Risk Assessment as well as the identification of future areas of research. The report notes that the inherent uncertainty and long timelines associated with adaptation planning spur the need for periodic reassessment and a renewed understanding of the extent and nature of impacts affecting Vancouver.

Identifying Actions

Through the first iteration of the Greenest City Action Plan in 2011, 125 priority actions were created to address climate change in Vancouver. The original actions were identified thanks to the collaboration of experts, city staff, local organizations and city residents. In total, 35,000 people had a hand in crafting these priority actions. Actions were reassessed and organized into 10 broader goals within the 2015-2020 update of the Greenest City Action Plan. This update employed further external engagement, this time garnering input from 46,000 people through in-person meetings, social media interaction and more formal advisory relationships. All of the identified goals of the 2015-2020 plan such as Climate and Renewables are created with the intention of improving upon a defined historical baseline. For instance, the Climate and Renewables goal aims to reduce greenhouse gas (GHG) emissions to 80% below 2007 (baseline) levels while the Zero Waste goal intends to bring waste levels to 50% of those of 2008. The Green Bond Program considers the conclusions made from these plans, as well as other climate change related plans (with a focus on renewable energy and GHG reduction) in the City of Vancouver in order to aid in determining which capital projects are appropriate for investment. Finally, project eligibility criteria is further set out through the Green Bond framework which specifies 7 eligible categories including renewable energy, green buildings, clean transportation, pollution prevention and control, and others.

Implementation

Annually, since its inception in 2018, Vancouver’s Green Bond Program (GBP) has produced an update report outlining which capital projects received funding through the proceeds of the program. Projects that are eligible for funding include new projects as well those completed within 36 months of the bond issuance as long as the project meets the criteria partially outlined in the short description and identifying actions section of this case study. In essence, projects which “advance a low-carbon, climate-resilient future” may be considered. To date, six projects have received funding through the GBP. These six projects vary in focus and include green buildings, clean transportation, renewable energy, and sustainable water and wastewater management. Four of the projects have been completed as of 2020 and the entirety of the available GBP proceeds totaling $85 million Canadian dollars have been allocated. The lion’s share of funding has been directed to the Roddan Lodge, a green building redevelopment effort, and to sewer and water main reconstruction. Ultimately it is the Finance, Risk and Supply Chain Management Department which makes the final decision on which projects are funded through the GBP through consultation with various relevant departments and after an assessment of the social and environmental risks associated with each project. The bond is supported by all major Canadian banks including the Canadian Imperial Bank of Commerce (CIBC) and the Royal Bank of Canada (RBC).

Outcomes and Monitoring Progress

While it may be too early to attain a full picture of the outcomes of the Green Bond Program (GBP), that all of the $85 million allocated to the program has been utilized in the first 2 years could been seen as a success. As mentioned previously, this bond program is part of the city’s larger bond program and so the success of any green project has no bearing on the payment of principals or interest. Despite these considerations, the outcomes of those documents upon which the GBP is founded may be considered. Most notably, the Green City Action Plan 2020 has made significant strides towards their 10 outlined goals with some progress shown in each goal area. The plan has exceeded targets in many areas such as green transportation, access to nature, and access to food. These goals have also encountered many barriers, with one goal, clean air, seeing increases in instances of poor air quality. This lowering of air quality is likely due to factors outside of municipal control such as regional industrial projects and increased port activity to accommodate oil pipeline activity. Still, steps are being taken to combat these external forces and improve air quality such as integrating such considerations into local zoning by-laws and supporting electric vehicle uptake through new infrastructure. Overall, the GBP is said to support a host of co-benefits along with aiding in traditional environmental improvement such as supporting technological innovations and improving the economic standings of residents through energy savings supported by the GBP.

Next Steps

Broadly speaking, there are many next steps to better support the City of Vancouver’s efforts towards sustainability and resilience. Some examples include through their Climate Change Adaptation Strategy the city repeatedly identifies the need to integrate the wide array of climate change related documents in order to ensure all city projects and programs are working as effectively as possible towards a common goal. Further, the city intends to study the effects of climate change on parks and natural area especially in coastal areas. Next, they intend to engage more thoroughly with the public in order to craft adaptation options for coastline preparedness which stem from their preliminary Coastal Flood Risk Assessment (CFRA). The City of Vancouver has also identified the need to review and update many of its climate change related plans including the Greenest City Action Plan (GCAP) in order to track progress and to incorporate the most up to date scientific information possible. The Green Bond Program itself is also in the midst of reinvention as the city has opted to create a Sustainability Bond Program in its place. This Sustainability Bond better captures projects that have components which may be deemed socially responsible such as affordable housing or access to affordable basic infrastructure. Those projects which are both green and socially responsible are labelled sustainable. This arrangement allows for investment in projects that meet criteria from either “Green Bond Principles”, “Social Bond Principles” or both, as set out by the International City/County Management Association (ICMA).


Understanding and Assessing Impacts

While the Green Bond Program itself does not elaborate as to the identification of climate change impacts on the City of Vancouver, the host of climate change related documents produced by the city in recent years provides a wealth of insight into the topic. Through their Climate Change Adaptation Strategy Vancouver has identified three areas of concern: hotter, drier summers; warmer, wetter winters; sea level rise. Much of the information related to these impacts was compiled through observation of currently experienced impacts as well as through climate projections provided by the International Panel on Climate Change. The city has experienced a host of climate change related impacts in the past decade including coastal flooding, poor air conditions due to wildfires, and drought conditions. Vancouver has opted to utilize these future projections rather than historical data. In doing so, the City of Vancouver downscaled the projections in order to better tailor them to a local context. Aside from the use of climate projections, Vancouver has also undertaken broad vulnerability and risk assessments. These assessments also led to the creation of a Coastal Flood Risk Assessment as well as the identification of future areas of research. The report notes that the inherent uncertainty and long timelines associated with adaptation planning spur the need for periodic reassessment and a renewed understanding of the extent and nature of impacts affecting Vancouver.

Identifying Actions

Through the first iteration of the Greenest City Action Plan in 2011, 125 priority actions were created to address climate change in Vancouver. The original actions were identified thanks to the collaboration of experts, city staff, local organizations and city residents. In total, 35,000 people had a hand in crafting these priority actions. Actions were reassessed and organized into 10 broader goals within the 2015-2020 update of the Greenest City Action Plan. This update employed further external engagement, this time garnering input from 46,000 people through in-person meetings, social media interaction and more formal advisory relationships. All of the identified goals of the 2015-2020 plan such as Climate and Renewables are created with the intention of improving upon a defined historical baseline. For instance, the Climate and Renewables goal aims to reduce greenhouse gas (GHG) emissions to 80% below 2007 (baseline) levels while the Zero Waste goal intends to bring waste levels to 50% of those of 2008. The Green Bond Program considers the conclusions made from these plans, as well as other climate change related plans (with a focus on renewable energy and GHG reduction) in the City of Vancouver in order to aid in determining which capital projects are appropriate for investment. Finally, project eligibility criteria is further set out through the Green Bond framework which specifies 7 eligible categories including renewable energy, green buildings, clean transportation, pollution prevention and control, and others.

Implementation

Annually, since its inception in 2018, Vancouver’s Green Bond Program (GBP) has produced an update report outlining which capital projects received funding through the proceeds of the program. Projects that are eligible for funding include new projects as well those completed within 36 months of the bond issuance as long as the project meets the criteria partially outlined in the short description and identifying actions section of this case study. In essence, projects which “advance a low-carbon, climate-resilient future” may be considered. To date, six projects have received funding through the GBP. These six projects vary in focus and include green buildings, clean transportation, renewable energy, and sustainable water and wastewater management. Four of the projects have been completed as of 2020 and the entirety of the available GBP proceeds totaling $85 million Canadian dollars have been allocated. The lion’s share of funding has been directed to the Roddan Lodge, a green building redevelopment effort, and to sewer and water main reconstruction. Ultimately it is the Finance, Risk and Supply Chain Management Department which makes the final decision on which projects are funded through the GBP through consultation with various relevant departments and after an assessment of the social and environmental risks associated with each project. The bond is supported by all major Canadian banks including the Canadian Imperial Bank of Commerce (CIBC) and the Royal Bank of Canada (RBC).

Outcomes and Monitoring Progress

While it may be too early to attain a full picture of the outcomes of the Green Bond Program (GBP), that all of the $85 million allocated to the program has been utilized in the first 2 years could been seen as a success. As mentioned previously, this bond program is part of the city’s larger bond program and so the success of any green project has no bearing on the payment of principals or interest. Despite these considerations, the outcomes of those documents upon which the GBP is founded may be considered. Most notably, the Green City Action Plan 2020 has made significant strides towards their 10 outlined goals with some progress shown in each goal area. The plan has exceeded targets in many areas such as green transportation, access to nature, and access to food. These goals have also encountered many barriers, with one goal, clean air, seeing increases in instances of poor air quality. This lowering of air quality is likely due to factors outside of municipal control such as regional industrial projects and increased port activity to accommodate oil pipeline activity. Still, steps are being taken to combat these external forces and improve air quality such as integrating such considerations into local zoning by-laws and supporting electric vehicle uptake through new infrastructure. Overall, the GBP is said to support a host of co-benefits along with aiding in traditional environmental improvement such as supporting technological innovations and improving the economic standings of residents through energy savings supported by the GBP.

Next Steps

Broadly speaking, there are many next steps to better support the City of Vancouver’s efforts towards sustainability and resilience. Some examples include through their Climate Change Adaptation Strategy the city repeatedly identifies the need to integrate the wide array of climate change related documents in order to ensure all city projects and programs are working as effectively as possible towards a common goal. Further, the city intends to study the effects of climate change on parks and natural area especially in coastal areas. Next, they intend to engage more thoroughly with the public in order to craft adaptation options for coastline preparedness which stem from their preliminary Coastal Flood Risk Assessment (CFRA). The City of Vancouver has also identified the need to review and update many of its climate change related plans including the Greenest City Action Plan (GCAP) in order to track progress and to incorporate the most up to date scientific information possible. The Green Bond Program itself is also in the midst of reinvention as the city has opted to create a Sustainability Bond Program in its place. This Sustainability Bond better captures projects that have components which may be deemed socially responsible such as affordable housing or access to affordable basic infrastructure. Those projects which are both green and socially responsible are labelled sustainable. This arrangement allows for investment in projects that meet criteria from either “Green Bond Principles”, “Social Bond Principles” or both, as set out by the International City/County Management Association (ICMA).

Resources