Advancing Energy Efficiency through Green Bond Policies
39 Pages Posted: 1 Jun 2021
Date Written: March 18, 2021
Diffusion of new technology, such as green bond policies, is impacted by inefficiencies and frictions as the market navigates adoption. Using data from Fannie Mae multifamily green mortgage backed security issuances, we identify possible disconnects between pricing and benefits, as well as adoption trends. Evidence indicates that loans on properties backed by green bonds receive lower interest rates, lower debt service coverage ratios, and higher leverage ratios than their “brown” counterparts. Some of these findings represent stated program benefits, but others do not. Additionally, some benefits are observed accruing to properties which are not participating in a green MBS program, despite already qualifying for participation. Supporting evidence points to drivers of adoption and program refinements which could aid in policy maximization. Our results carry implications for both existing green bond programs as well as the diffusion of green bond policy into the broader capital markets.
Keywords: MBS, green bond, multifamily, issuance, energy efficiency, water efficiency
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