Fannie Mae Expands Green Bond Program
With the announcement of its latest Single-Family Green Mortgage-Backed Security, the agency has stepped up its commitment to green financing.
Kermit the Frog once sang “it’s not easy bein’ green,” but Fannie Mae seems to have no such troubles.
Late last month, the mortgage financier announced the issuance of its latest Single-Family Green Mortgage-Backed Security under its Green Bond Program. The first bond in the program was issued on April 22, 2020, in observance of the 50th anniversary of Earth Day. Since then, Fannie Mae reports it has issued over $40 million worth of the issuance.
The MBS transactions include only mortgage loans backed by newly constructed single-family residential homes with ENERGY STAR certifications. Those certifications must meet or exceed national program requirements for ENERGY STAR Certified Homes, says Fannie Mae. On average, ENERGY STAR Certified Homes are 20% more energy-efficient than atypical single-family homes built to code and 10% more efficient than typical single-family homes.
Fannie Mae says it has partnered with PEG, LLC in order to ensure that all properties underlying the MBS have received the ENERGY STAR certification.
Looking to the future, Single-Family Green MBS issuances may encompass other energy-efficient new construction standards like the ENERGY STAR Certified Homes, Version 3.0.
Additionally, Fannie Mae has issued $75 billion of Multifamily Green MBS since 2010. These securities have been backed by properties that target reductions in water consumption or energy, as well as green-certified properties.
The MBS program was the recipient of a Light Green Second Opinion from CICERO Shades of Green, which offers research-based evaluations of green bond investment frameworks in order to better illuminate the environmental quality of the bonds for investors.
Hugh R. Frater, Fannie Mae CEO, says, “Our new Single-Family Green MBS issuances further our commitment to sustainability in our business, the homes we finance, and the communities we serve. These transactions are the latest step in a journey – begun a decade ago when we introduced green finance to the multifamily market – that increasingly ties Fannie Mae’s business activities to measurable Environmental, Social, and Governance (ESG) outcomes.
“We are proud to be a driver of innovation in green mortgage finance.”
Fannie Mae has been the largest green bond issuer in the world since 2017, the agency says. It has been awarded the ENERGY STAR Partner of the Year from the EPA every year since 2015.
“We are excited about the Single-Family Green MBS program and look forward to increasing our issuances backed by green, energy-efficient mortgage loans,” says Renee Schultz, senior vice president for capital markets at Fannie Mae. “These offerings have attracted investor interest and serve to enhance liquidity in the single-family mortgage finance market.”