ICMA recognizes green enabling projects

According to the International Energy Agency (IEA), investment in five key clean energy technologies — solar photovoltaics (PV), wind, nuclear power, electric cars, and heat pumps — has seen a significant increase in investment of nearly 50% from 2019 to 2023. By 2023, this investment reached US$1.0 trillion, growing at an annual rate of approximately 10% during this period.¹

The digital transformation has similarly boosted the Information & Communication Technology (ICT) sector, growing at an average rate of 7.6% in OECD countries in 2023.² The supply chains supporting these technologies, including minerals, polymers, semiconductors, smart grids, and sensors, require continuous investment to ensure the sustainable growth of clean energy and digital solutions.

Demand for critical minerals

As key inputs for these technologies, the IEA projects that the demand for critical minerals for clean energy technologies will double under the Stated Policies Scenario (STEPS) and quadruple under the Sustainable Development Scenario (SDS) by 2040.³ Nations like Canada and the U.S. are increasing investments in critical minerals through policies, grants, and incentives. For instance, Canada’s Critical Mineral Strategy, launched in 2022, is backed by nearly $4 billion, while the U.S. Department of Energy plans to allocate over $3 billion across 25 projects under the Bipartisan Infrastructure Law.^4,5

Role of other industries

Beyond the evident role of critical minerals, industries such as chemicals and smart mobility are crucial in advancing environmental solutions. The chemical sector is advancing circular economy products using green bonds to finance waste- and bio-based products.⁶ Similarly, innovations in software and sensors used in smart mobility technologies are enhancing urban transit systems, reducing congestion and pollution.

New market guidance from ICMA

The sectors above are just a few of the sectors identified in the new Green Enabling Projects Guidance from the International Capital Markets Association (ICMA) published in June 2024.⁷ The guidance positions key industries, like metals and mining, for green debt financing and allows issuers to finance essential activities for the development of critical technologies. Other sectors, including building and construction, chemicals, telecommunications, and industrial parts manufacturing, also stand to benefit.

The Guidance provides a framework for projects that, while not explicitly green themselves (based on current market standards), are seen as crucial to the value chain of eligible green projects, as defined by ICMA’s Green Bond Principles. Under ICMA’s new guidelines green enabling projects or activities must demonstrate the necessity for an enabled green project’s value chain to be developed and/or implemented. Projects and activities must also meet safeguards and structuring criteria, ensuring transparency and limiting reliance on fossil fuels. For industrial sectors like mining and manufacturing, demonstrating adherence with Do No Significant Harm principles and achieving high standards of environmental and social performance remain critical.

Market response and future outlook

Scotiabank’s Sustainable Finance team continues to monitor market response and engage with investors. Expanding green bond eligibility to include green enabling activities is a significant development for the growth of the sustainable finance market and the mobilization of capital to low-carbon value chains. As green bonds represent over 60% of the ESG-labelled bond market volume in 2024, its evident that use of proceeds instruments remain a trusted tool for the market.⁸ ICMA’s new guidance attempts to reconcile investment priorities for the low-carbon transition with established debt financing tools investors and issuers have come to rely on.

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