This month, Enbridge Inc. issued a $1.1B Sustainability Linked Bond (“SLB”) in Canada, following their initial USD issuance. At RPIA, we welcomed Enbridge’s leadership as the first North American energy company to issue an SLB. We believe that transition-focused financing will play a key role in the Canadian economy’s pathway to net-zero by 2050. With both transactions, Enbridge has provided an essential benchmark for Canadian and global energy companies. 

Enbridge’s transaction is especially important within the Canadian context. Canada faces a “transition gap” that must be addressed by Energy and Utility companies who face accelerating risks as economies move away from fossil fuels. We believe that Enbridge’s inaugural transactions represent the key first step in addressing this gap by aligning the company’s financing with broader decarbonization goals. The “transition gap” has only widened since the first SLBs were issued by European corporations. Consider that nearly 15% of year-to-date bond issuance in European Energy and Utility companies has come in the form of SLBs despite Energy/Utilities relatively low contribution to Europe’s economy (the Energy sector represents approximately 4% of European non-financial GDP).¹ Conversely, Energy and Utility companies represent approximately 10% of Canadian GDP and are the fourth largest energy exporter in the world.²  And yet, despite the clear need, Canadian issuers have been slow to tie their public financing to decarbonization goals. We believe Enbridge’s transaction could be seen as the “shot across the bow” for Canadian Energy and Utility companies. 

"We were very pleased to engage and partner with RPIA, as a large and important ESG investor, in advancing the sustainability objectives of both of our firms in ensuring the most appropriate and impactful structure was achieved in our first sustainability linked bond in Canada. We have set important and ambitious targets across all major ESG categories and are excited to continue to work with RPIA and other investors over the months and years ahead." 
- Max Chan | Vice President, Treasury & Enterprise Risk, Enbridge Inc.

As a global corporate bond manager, RPIA experienced the explosive growth of SLB issuance in US and European debt markets and realized that this structure was highly advantageous to Canadian companies looking to decarbonize their operations over time. This led to early engagement with Enbridge over the past 12 months discussing potential SLB frameworks, providing the company with investor perspective on appropriate structures that highlight the company’s ambition in ESG. This consistent dialogue helped lead to the structures Enbridge adopted for both its US and Canadian dollar bonds. It also showed us that Enbridge management had thoughtfully considered transition risks and opportunities for the company and was ready to align their financial interests with their climate objectives. 

¹EU Commission – “Energy Sector Economic Analysis” (As of 2020)
²Government of Canada - “Energy and the Economy” (As of 2019)

Important Information

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RPIA aims to consider ESG factors as part of our overall investment process, but the weight and importance of it can vary across the investment funds we manage. Always refer to the relevant fund offering documents for important information on the investment objectives, strategies and associated risks of a particular fund. The consideration of ESG factors in the investment process for RP Strategic Income Plus Fund and RP Alternative Global Bond Fund plays a limited role and is weighted less than the core financial and credit analysis employed in the management of these funds.

For more information, visit www.rpia.ca/esg.