The Government of Canada issued a CAD 2 billion seven-year green bond in February 2025, the fourth transaction under its national Green Bond Programme and the second issuance of the 2024-25 fiscal year. The Department of Finance confirmed that the two transactions in the current fiscal year together raised CAD 4 billion in total proceeds, building the sovereign green debt stock that Canada has been developing since the programme's inauguration.
The bond was issued under an updated framework that expanded the eligible use-of-proceeds categories compared with earlier transactions in the programme. Canada's sovereign green bonds have attracted consistent demand from international institutional investors seeking highly rated, liquid instruments aligned with environmental criteria, and the programme has become a reference benchmark for other sovereign issuers in the Americas region considering similar debt structures.
USE OF PROCEEDS AND ELIGIBLE CATEGORIES
Proceeds from the bond will be allocated across four eligible categories: clean energy, clean transportation, energy efficiency and nuclear energy. The inclusion of nuclear energy in the eligible use-of-proceeds categories reflects the Canadian government's policy position that certain nuclear technologies — including small modular reactors under development — are consistent with its climate transition objectives. This classification has generated discussion within the sustainable finance community, where views on the eligibility of nuclear power diverge, but it aligns with Canada's existing energy mix in which nuclear generation accounts for a significant share of electricity production, particularly in Ontario.
Clean transportation allocations are expected to support projects including electrification of federal vehicle fleets, investment in zero-emission transit infrastructure and the development of charging networks. Energy efficiency proceeds target building retrofits across the federal estate, where improvements to heating, cooling and insulation systems can generate measurable reductions in energy consumption and associated greenhouse gas emissions over the lifetime of the investments.
The clean energy category covers renewable power generation projects including hydro, wind and solar. Many of these projects are concentrated in provinces that have committed to phasing out fossil-fuel generation and are investing in grid infrastructure to accommodate higher proportions of variable renewable energy. The updated framework aligns Canada's programme with the International Capital Market Association's Green Bond Principles, which set the internationally recognised standard for use-of-proceeds bonds in the sustainable debt market.
BUILDING A SOVEREIGN GREEN YIELD CURVE
The seven-year maturity of the new bond extends the duration profile of Canada's sovereign green debt and adds a data point to the emerging sovereign green yield curve. Sovereign green yield curves are considered a public good in sustainable finance because they establish government-guaranteed reference rates against which corporate and sub-sovereign issuers can price their own green instruments, making it easier to quantify the pricing premium — commonly referred to as the greenium — that investors assign to labelled sustainable bonds.
With four issuances completed and CAD 4 billion raised in the 2024-25 fiscal year alone, Canada has positioned itself as one of the more active sovereign green bond issuers within the G7. The Department of Finance publishes annual allocation and impact reports providing investors with details of how proceeds have been deployed and the environmental outcomes attributed to funded projects. The federal government has indicated that green bond issuances will continue to form a component of the overall debt management programme, with the size and timing of future transactions subject to borrowing requirements and prevailing market conditions.