Exclusive Q&A with Karen Clarke-Whistler, Chief Environmental Officer, TD Bank

TD continues green strategy with the first bank-led green bond in Canada

(Justmeans/3BL Media) - Last year, TD Bank Group (TD) became the first Canadian commercial lender to sell a green bond, offering a CND $500 million (USD $454 million) debt security to raise capital to fund specific environmental initiatives. The three-year bond has a maturity date of April 3, 2017, with the proceeds used exclusively for green initiatives funded in Canada. 

For SRI investors, this is welcome news. But perhaps not so surprising, considering that TD has made green initiatives a cornerstone of their business strategy. By the end of 2014, TD had 140 LEED certified locations in North America and more than 110 facilities generating solar energy. In addition, they have branches designed to be net zero energy.

With their green bond, TD is entering a rapidly growing market that is estimated to be anywhere between USD $10 billion and $346 billion.{1}

I had a chance to ask Karen Clarke-Whistler, TD's Chief Environment Officer, some questions about TD's green bond, how it fits into TD's overall green strategy and the green bond climate in Canada.

There are several definitions for "green bond" out there. How does TD define it?

You're right, there are quite a few definitions. The reality is that right now, people have to develop their own definitions. We say that with a green bond, the proceeds will contribute to a low carbon economy. There are three ways the proceeds will be used: renewables, energy efficiency/green buildings and green infrastructure, which will be primarily public transit support. To back that up, we have worked with the Canadian Standards Association to build out criteria for each of those three categories, so it makes it pretty easy for us to say if something is in or out. Our auditor Ernst & Young will be assuring the use of proceeds.

How is the green bond pricing different from a standard bond?

The pricing was flat to the standard issue bond. In fact, on the same day we issued a vanilla five-year bond because we wanted to see what the spread would be, if any, and in fact, there was no spread in pricing. So the pricing was flat relative to our standard bond.

How does the green bond issue fit into TD's overall interest in supporting environmental projects?

It's absolutely a part of it. The starting point for us is that we are a carbon neutral bank. We became carbon neutral in 2009 and we have used that commitment to low carbon and energy efficiency to build out a very broad strategy. We started by learning about our own buildings—we have over 2000 of them. We learned how to be energy-efficient, purchased lots of renewable energy credits and have some net zero branches. So the green bond is really part and parcel of our overall strategy, which we've been building up over the last five years.

How has that strategy translated into the capital markets?

When we'd gained a deep understanding of how the energy efficiency and low carbon technologies we were using worked, we were able to walk that across to our financing group and say, "Hey guys, we know you think this stuff is crazy and risky, but it's not." I'm going back to 2009–2010 here, and they were able to actually get quite a lead in the Canadian market and in financing renewables. We were able to be the first bank out of the gate on the Ontario microFIT Program, which is similar to the German program for residential and small business.{2} So we are able to create a term loan product for that program before any other bank. We've been aggressively going after high-quality renewables, low-carbon type projects, so really the green bond is the next step. We wanted to demonstrate to the capital market that this is a vibrant part of the economy; it's not just comprised of startups that are high-risk. There are some serious players in this and a big funnel of projects, and it's here to stay.

How much of these proceeds are going to be used in refinancing versus financing new projects?

It includes both, actually. Our starting point was that everything financed by the green bond had to be no older than three months at the time we issued the bond. We basically did that to coincide with the beginning of our 2014 fiscal year. The bond is now completely filled, but what happens, of course, is that projects come in that are loans and then, as the loan is retired, you've got to top up. So it is a continuous cycle of refinancing. But our starting point was to attract new business to the bank and not retread what we already have in there, because honestly, that could've been done the next day. So it's been an interesting journey. I think now that we understand the fund a little bit better and we've been able to demonstrate internally that we can be a bit more innovative with some of the projects that will now be coming into the funnel.

How do you view the overall green bond space in Canada?

There's a lot of activity in Canada. The government of Ontario just issued a green bond, which was great to see and I know there are lots of other entities that are looking to issue green bonds. The reality is that there are a lot of great potential projects around Canada because we have a very green source of electricity. We've got lots of hydroelectric, wind and solar activity that is quite apart from public infrastructure and green buildings, so I fully expect to see more green bonds issued. I know all of the banks are very active in underwriting green bonds, which is kind of a first step to see how it goes. So I expect to see lots more activity in Canada and North America over the next year or two.

TD has signed on to the Green Bond Principles, which offer an excellent guide to the market, but remain voluntary. What is the impact of the lack of legally enforceable green bond standards? 

The green bond principles are voluntary but they are quite comprehensive. I do see that over time, this market is going to settle in, and that there will be standards or standards-like protocols developed. We see lots of activity in the consulting world and all sorts of different groups. Barclay's MSCI has put its own sort of guidance around what would be expected in its Green Bond Index. I think the market will drive towards more consistency, but right now it's such early days. I'd like to see the opportunity for this market to have a little bit of flexibility in it. I don't think we've even begun to see some of the innovation that could occur through to kind of try to absolutely tighten it down right away. And anybody who's issuing green bonds is looking at what the last person does and is trying to up the ante, so the competition is great. I don't think that many people are going to get away with greenwashing because there are too many people like us who are going to call them on it. Let's let the market mature a little bit before we try to clamp down on it. 

What are the different barometers and performance metrics you use to evaluate the bond?

For us, a measure of success is demonstrating leadership in the environment because it is a differentiator for us. It's part of our goal. Our investment team would say diversification of investors. We had 12 investors who were new to TD. So of the 39 investors in the bond, a third were new to TD. They could have invested in a vanilla bond. That was of interest to us. There were a number of SRI investors, but there were also a number of mainstream investors. Obviously, we want to attract the SRI market: TD is the biggest Canadian bank destination for SRI investors. But I'm interested to see mainstream investors coming into this as well.

Are they all institutional investors and how can an individual investor get in?

Yes, the initial offering was an institutional offering. Now a lot of those, like BlackRock and of course, TD, will be selling those off on the secondary market to individual investors as part of mutual fund packages.

Does TD have any plans to issue more green bonds?

There is no concrete plan right now, but we recently identified that there is no barrier for us to issue another green bond. So it really comes down to when we need to raise money. We are quite well capitalized now and you may not want to just repeat the same thing again. You may want to look at a green bond in a different currency, for example. So we're totally open to it. We feel very confident that we've got a great funnel of projects that can go into it and are looking forward to seeing how this space evolves.

Full disclosure: I have been a happy TD customer for years. At my branch in Manhattan, for a little while, they created a beautiful mini-forest, complete with tree, grass and foliage in the little outside area where they have the ATM machines. There was also an interactive touch screen window where people could learn about the environment. 

That's great to hear! That was our program called the "A-Tree-M," which was part of our great partnership with Bette Midler's New York Restoration Project. TD is a lead sponsor of NYRP's MillionTreesNYC, and the millionth tree is actually going to be planted this autumn.



About Karen Clarke-Whistler

Since 2008, Karen Clarke-Whistler has been the Chief Environment Officer of TD Bank Group (TD). Under Karen’s leadership TD became the first North American-based bank to be carbon neutral. Karen also led the development and launch of TD Forests, which works to help protect critical North American forest habitat, grow urban forests and green spaces, and promote the responsible use of forest products. Karen is an environmental scientist who is widely recognized as a thought leader in environmental business matters. Prior to joining TD, she spent more than 15 years working as an environmental consultant to a diverse base of clients in North and South America, Europe and Africa. Karen was recognized as one of the 2012 Clean50 (50 individuals honored for their outstanding contribution to clean capitalism) and as one of the 2014 Clean16 (national leader in their sectors drawn from the Clean50). She advises or serves on the boards of directors of a number of groups, including the Boreal Leadership Council, the Centre for Excellence in Mining Innovation, Sustainability CoLab, and Network of Centres of Excellence (NCE). Karen holds a master’s degree in land resource science from Canada’s University of Guelph and a bachelor’s degree in ecology from the University of Toronto. Karen lives in Toronto.

About TD Bank Group

The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Group ("TD" or the "Bank"). TD is the sixth largest bank in North America by branches and serves more than 23 million customers in three key businesses operating in a number of locations in financial centres around the globe: Canadian Retail, including TD Canada Trust, TD Auto Finance Canada, TD Wealth (Canada), TD Direct Investing, and TD Insurance; U.S. Retail, including TD Bank, America's Most Convenient Bank, TD Auto Finance U.S., TD Wealth (U.S.), and an investment in TD Ameritrade; and Wholesale Banking, including TD Securities. TD also ranks among the world's leading online financial services firms, with approximately 9.4 million active online and mobile customers. TD had CDN$945 billion in assets on October 31, 2014. The Toronto-Dominion Bank trades under the symbol "TD" on the Toronto and New York Stock Exchanges.


1. Green Bonds: Victory Bonds for the environment. TD Economics. November 1, 2013. http://www.td.com/document/PDF/economics/special/GreenBonds_Canada.pdf

2. In 1990, the German government passed the Electricity Feed-in Law, which supported various renewable energy projects, including microgeneration, through a feed‐in tariff. (See Dawn Strifler, "Small Scale, Big Impact: A Comprehensive Evaluation of Ontario’s microFIT Program." July 31, 2012. http://sei.info.yorku.ca/files/2012/12/120905-MRP-Final.pdf).

image: TD's "A-Tree-M" Project installed at a branch in Manhattan.