Advancing energy efficiency through green bond policy: Multifamily green mortgage backed securities issuance

Abstract

advancing energy efficiency through green mortgage backed securities avis devine* meagan mccollum∗† march 18, 2021 abstract 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 ∗york university, 4700 keele st. toronto on m3p1j3, canada; adevine@schulich.yorku.ca; orcid: 0000-0001-7417-604x †university of tulsa, 800 s. tucker drive, tulsa ok 74110, usa; meagan-mccollum@utulsa.edu; orcid: 0000-0003-4227-5929 1 introduction green bonds, financial instruments which link proceeds …

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