Pick Your Greens: Market Share and the Green Mortgage Boom

Abstract

We study the origination of multifamily mortgages at the onset of the recent green bond boom. We find that lenders cluster their issuance of green loans according to where they hold a share of the market. Lenders with a high share of a given metropolitan area originate a larger volume, number, and proportion of green lending in that location relative to low market share issuers. Green loans by lenders with market power command higher interest rate spreads, but also exhibit better cash flow performance ex post. The results are stronger for market segments likely prone to worse information asymmetries. This suggests that concentration elicits a form of learning by owning, enabling high market share lenders to cherry-pick which of their loans to turn green.

Keywords: green bonds, multifamily mortgages, market concentration, information asymmetries D83, G21, G23, L11

JEL Classification: G21, D83, G23, L11, R31