The City of Toronto is the first municipality in Canada to establish a Social Debenture Program. This program allows the City to continue its leadership in the area of sustainable finance and promote positive socioeconomic outcomes. It focuses on outcomes that align with many of the City’s strategic priorities, including:
The City has developed a Social Debenture Framework in accordance with the International Capital Market Association’s (ICMA) 2018 Social Bond Principles. The ICMA’s Social Bond Principles are widely considered to be an industry best practice. Sustainalytics, a leading Environment, Social, and Governance (ESG) second-party opinion provider, has provided a positive opinion on the City’s Social Debenture framework’s alignment with the Social Bond Principles.
The City of Toronto was awarded “Social Bond of the Year – Local Authority/Municipality” at the 2021 and 2022 Environmental Finance Bond Awards for the City’s inaugural social bond in 2020. The “Social Bond of the Year” award is a first-of-its-kind recognition in Canada’s public sector. The City’s strong Social Bond Framework, along with detailed impact reporting, is being recognized as a template for other municipalities.
City of Toronto Social Bond Newsletter, June 2021
City of Toronto Social Bond Newsletter, June 2022
The proceeds of each Social Debenture will be applied exclusively to finance or re-finance, in whole or in part, new and/or existing capital projects under the City of Toronto Social Debenture Framework.
“Eligible Projects” means identified capital projects that meet the City’s social objectives. The selection of these projects is generally guided by the prevailing plans , policies and strategies as approved by Toronto City Council. The social objectives supported by these projects generally include, but are not limited to:
A) Social and affordable housing new development and/or capital repair projects
B) Affordable basic infrastructure (e.g. clean drinking water, sewers, sanitation, transit)
C) Access to essential services (e.g. long term care, senior services, emergency shelters)
D) Socioeconomic advancement and empowerment.
In accordance with the City of Toronto Act, the City can only issue long-term debentures for capital projects. Borrowing for operating expenses is prohibited. Without limitation, capital projects across the following categories will be considered as Social Projects and eligible for financing from Social Debenture proceeds:
Proceeds of Social Debentures will be allocated to capital projects aligning with City’s HousingTO Action Plan  that are aimed at fighting against housing exclusion by providing social housing and/or affordable housing with and without supports (e.g. onsite health services and other drop-in services) as well as shelter to disadvantaged populations.
Related capital expenditures include, but are not limited to:
(i) Development and provision of shelters, and social and affordable housing in Toronto;
(ii) Renovation, maintenance and improvements of shelters, and social and affordable housing projects (i.e. capital projects to enhance accessibility ),
The City has socio-economic requirements to determine eligible beneficiaries. Selection criteria to determine eligible beneficiaries (i.e. marginalized populations) includes, for example: income level, size of household, current asset limit, victim of human trafficking or domestic violence, asylum claim status, etc.
Proceeds of Social Debentures will be allocated to programs and/or projects aimed at improving community infrastructure (e.g. clean drinking water, sewers, sanitation, transit). These projects contribute to providing access to safe, affordable, accessible and sustainable basic community infrastructure, improving quality of life in the City as well as promoting social inclusion.
Related capital expenditures include, but are not limited to, new development, expansion, maintenance, improvement, repair, and provision of infrastructure, supporting infrastructure, public transit/transportation (e.g. subway trains, buses, streetcars), and equipment for:
(i) collecting, transporting, and disposing of solid waste for disadvantaged targeted populations (e.g. low-income, seniors, disabled) at adapted rate ;
(ii) collecting, transporting, and processing of recyclables, composting, and household hazardous waste for the public and at adapted rate;
(iii) providing safe, affordable  and accessible transportation and sidewalks to the public; and
(iv) providing sustainable water and wastewater management such as clean and sustainable drinking water to the public and at adapted rate to disadvantaged targeted population (e.g. low-income senior or low-income disabled) , as well as storm water management, sustainable urban drainage systems and flood mitigation measures to the public.
The City has socio-economic requirements to determine eligible beneficiaries for programs that offer relief or rebate that are only available to target marginalized populations. Selection criteria to determine eligible beneficiaries (i.e. marginalized populations) generally include: income level, age, disability status, etc.
Proceeds of Social Debentures will be allocated to capital projects that enhance access to public, not-for-profit, free or subsidized essential services. Related capital expenditures include, but are not limited to, new development, expansion, maintenance, renovation, and provision of infrastructure, supporting infrastructure and other capital expenditures for:
(i) clinics and health counselling , long term care centers and senior services ;
(ii) provision of child, youth or adult education and vocational training services to vulnerable groups ; and
(iii) mental health and addiction programing and supportive services.
Proceeds of the Social Debentures will be allocated to capital projects aimed at integrating and providing basic services along with social advancing and empowering programmes (e.g. education, adapted programs and inclusive services) to several vulnerable population groups (e.g, older adults, new immigrants, youth, low income families, people with disabilities, individuals experiencing homelessness, etc.). Related capital expenditures include, but are not limited to, new development, expansion, maintenance, renovation, and provision of infrastructure, supporting infrastructure, and equipment for:
(i) providing employment and social supports  to youth, new immigrants, social assistance recipients and adult dependants, low-income Toronto residents, (e.g employment centers );
(ii) ensuring safe, affordable and universal accessibility to the public transportation for disadvantaged targeted populations (e.g. children, disabled, low-income, seniors) ;
(iii) supporting older adults and/or people with disabilities such as care homes, day centres, rehabilitation and specialized assistance that allow maximizing the development of their capacities and possibilities of social integration, etc; and
(iv) providing free and equitable access to public library services which preserves, promotes and supports universal access to a broad range of human knowledge, experience, information and ideas, as well as support programs for targeted populations such as youth and new immigrants (e.g. youth hubs , English as Second Language & Newcomer programs ).
 Examples: 2019-2022 Poverty Reduction Strategy Term Action Plan https://www.toronto.ca/legdocs/mmis/2019/ex/bgrd/backgroundfile-139479.pdfMulti-Year Accessibility Plan 2020-2025: https://www.toronto.ca/city-government/accessibility-human-rights/accessibility-at-the-city-of-toronto/multi-year-accessibility-plan/HousingTO 2020-2030 Action Plan: https://www.toronto.ca/legdocs/mmis/2019/ph/bgrd/backgroundfile-140651.pdf https://www.toronto.ca/legdocs/mmis/2019/ph/bgrd/backgroundfile-140651.pdf Ontario’s Accessibility Action Plan for the Accessibility for Ontarians with Disabilities Act https://www.ontario.ca/page/path-2025-ontarios-accessibility-action-plan#section-0 Solid Waste Rebate Program: https://www.toronto.ca/services-payments/property-taxes-utilities/property-tax/property-tax-rebates-and-relief-programs/property-tax-and-utility-relief-program/ Capital expenditure is fully subsidized (over 35% of operating expenditure is subsidized) in order to keep the fare affordable to the public https://www.toronto.ca/legdocs/mmis/2020/bu/bgrd/backgroundfile-141667.pdf Example – accessible transit by subway https://www.ttc.ca/TTC_Accessibility/Easier_access_on_the_TTC/Riding_the_subway.jsp Water Rebate Program: https://www.toronto.ca/services-payments/property-taxes-utilities/property-tax/property-tax-rebates-and-relief-programs/property-tax-and-utility-relief-program/ Clinics & Health Counselling: https://www.toronto.ca/community-people/health-wellness-care/health-clinics/ Long-Term Care Homes: https://www.toronto.ca/community-people/housing-shelter/long-term-care-homes/ Examples of training courses https://www.toronto.ca/community-people/employment-social-support/employment-support/training-courses/https://www.torontopubliclibrary.ca/programs-and-classes/categories/newcomer-esl-programs.jsp Example https://www.toronto.ca/community-people/employment-social-support/https://www.torontopubliclibrary.ca/job-help/ Employment and Social Services centers https://www.toronto.ca/community-people/employment-social-support/employment-support/toronto-employment-and-social-services-locations/ Transit discount program https://www.toronto.ca/community-people/employment-social-support/support-for-people-in-financial-need/assistance-through-ontario-works/transit-discount/Multi-year Accessibility Plan https://www.toronto.ca/city-government/accessibility-human-rights/accessibility-at-the-city-of-toronto/multi-year-accessibility-plan/WheelTrans Strategy https://www.ttc.ca/WheelTrans/Strategy/index.jsp Youth hubs: https://www.torontopubliclibrary.ca/services/youth-hubs.jsp Example https://www.torontopubliclibrary.ca/programs-and-classes/categories/newcomer-esl-programs.jsp
The selection of eligible Social Projects is the responsibility of the Capital Markets Division (CMD) in consultation with internal and external expert stakeholders, which may include the combined effort of Division Heads (or designates) in Community and Social Services as well as Infrastructure and Development Services that are accountable for the Social Projects, and Legal Services Divisions and other City Divisions, Agencies and Corporations, as required.
CMD will select the eligible capital project(s) that meet the guidelines for use of proceeds as described above in the Social Debenture Framework. Projects must also comply with all applicable laws and regulations, and policies of the City of Toronto including assessments of the social  and environmental  risks of a given project when deemed relevant. CMD will verify the suitability and eligibility in collaboration with the Division Heads (or designates) of the preliminary selected projects. The list of selected eligible social projects will be dynamic, and change over time. The lookback period to allocate debenture proceeds to eligible projects is 3 years from the time of project completion. In accordance with the City of Toronto Act, debenture proceeds must be fully allocated to specific capital projects at the time of issuance and included in the certified debenture by-law.
The City will follow its current debt issuance procedure in accordance with the City of Toronto’s Financing of Capital Works Policy and Goals. The Mayor or the Mayor’s Alternate and the CFO are authorized to issue debt within the annual limit approved by Council. The internal or external legal representative(s) will draft a debenture by-law outlining the use of proceeds, amongst other items, that includes a schedule to the by-law listing the capital projects to be financed by the debenture, and the list of capital projects will also be shared on the City’s website. The debenture by-law shall be passed by the City’s Debenture Committee.
 Example: Equity impact assessment for the Parkdale Hub project (transforming City-building to maximize social benefit and affordable housing https://www.toronto.ca/legdocs/mmis/2019/ex/bgrd/backgroundfile-140937.pdf Environmental Assessment Act https://www.ontario.ca/page/preparing-environmental-assessments, sets out a planning and decision-making process so that potential environmental effects are considered before a project begins. The act applies to municipalities for projects such as transit projects, waste management projects etc. City can use Municipal Class Environmental Assessment process (risk-based approach to comply with the Environmental Assessment Act for both capital projects and infrastructure maintenance activities) https://municipalclassea.ca/
The funding sources (including debt financing) of capital projects are approved by Council. For each debenture issue, a debenture by-law is enacted at the time of debenture issuance which lists the dollar allocation of debenture proceeds to specific projects.
Proceeds of a debenture are usually used to provide permanent financing to capital projects, as per funding source allocation approved by Council, that have been paid by City’s working capital temporarily. In these common instances, the proceeds from the debenture will be applied directly to the project to repay the City’s temporary funding for the project. Where substantial completion has not been met on an Eligible Project, the funds will be invested and held in an account of the City.
In the rare case where substantial completion has been achieved and excess funds exist, the funds will be applied to other projects classified as Eligible Projects under this Social Debenture Framework and amendment to the debenture by-law is required to be passed by the Debenture Committee.
Accounting Services Division keeps track of funding status and funding sources of each capital project.
|Eligible Project Category and SDGs  and targets – Social impact indicators could include:||Sample of potential impact indicators|
|Social & Affordable housing
|Affordable Basic Infrastructure
|Access to Essential Services
|Socioeconomic advancement and empowerment
 SDG: UNPRI’s Sustainable Development Goals
Prior to the first anniversary of a social debenture issuance, CMD will review the capital projects financed by the City’s social debenture in order to assess the compliance of the capital projects with the Social Debenture Framework. This review will be conducted annually until full allocation of the net proceeds from the City’s social debenture is completed. The CFO will provide a report of the review, which the City will publish on its website.
It should be noted that the allocation of debenture proceeds is pre-determined at the time of debt issuance and included in the Schedule A of the by-law and cannot be altered during the term of the debenture .
In an unlikely event that the annual review identifies allocations made to activities that do not comply with the Social Debenture Framework, the City will allocate the corresponding amounts to different lending activities that are compliant with the Social Debenture Framework.
The issuance of debentures pursuant to this Framework will be implemented in accordance with the City of Toronto Act and directives issued by City Council as applicable.
 Example Schedule A of a debenture by-law (pg 8) https://www.toronto.ca/legdocs/bylaws/2019/law1297.pdf
The City reviews projects financed by the City’s social debenture to ensure compliance of the projects with the Social Debenture Framework. A review of these projects will be conducted annually until the net proceeds are fully allocated.
Social Bond Compliance Review 2020
|Settled Date||Coupon||Maturity Date||Currency||Issue Amount||CUSIP||Total Debenture Size|
|July 27, 2022||4.55%||July 27, 2042||CAD||$235 million||891288EC2||$235 million|
|September 28, 2021||1.60%||December 2, 2030 (reopening)||CAD||$100 million||891288DV1||$200 million|
|June 30, 2020||1.60%||December 2, 2030||CAD||$100 million||891288DV1||$100 million|
Sustainalytics, a leading Environment, Social, and Governance second-party opinion provider, was engaged to review the Social Debenture Framework and provide an opinion on the City’s Social Debenture framework’s alignment with the Social Bond Principles, as administered by the International Capital Market Association.
Sustainalytics released its opinion on March 18, 2020. Sustainalytics is of the opinion that the City of Toronto Social Debenture Framework “is credible and impactful”. In addition, Sustainalytics is “confident that City of Toronto is well-positioned to issue social debentures and that the Social Debenture Framework is robust, transparent, and in alignment with the core components of the Social Bond Principles 2018”. For the full Sustainalytics’ second-party opinion, please refer to the pdf file below.
Assurance – Sustainalytics Second Opinion on Social Debenture Framework