Fannie Mae green bond program slashes emissions, energy costs

3 min read
David Bell

Fannie Mae said on Thursday that its lending against environmentally friendly apartment and single-family homes has helped deliver environmental benefits and save money for apartment renters and homeowners.

In 2020 the agency issued US$13bn in multi-family green MBS, bundling some of those notes into US$1.9bn of green GeMs, while the agency also launched a green bond program backed by environmentally friendly single-family homes which so far has issued US$94m of paper.

“We are trying to accelerate the greening of US housing supply to help drive a lower emission economy," said Laurel Davis, senior vice president, environmental, social & governance at Fannie Mae. "There is also a real impact on peoples’ lives in terms of reducing costs which fits squarely with our social mission of making housing more affordable.”

The energy efficient buildings that were financed by this lending in 2020 alone resulted in 1.7 billion kilos of British thermal units annual energy savings, which is equivalent to the amount of energy used to power more than 12,000 US homes for one year, according to a report prepared by Fannie Mae.

They also saved around 800 million gallons of water, equivalent to the amount of water consumed by over 7,000 US families in one year, and resulted in an estimated reduction of 106,000 metric tons carbon dioxide equivalent greenhouse gas emissions, which is equivalent to removing roughly 23,000 passenger vehicles from the road for a year.

"Supporting a market that rewards energy and water-efficient residential development and operations has the power to create well-paying jobs and utility cost savings for families," wrote Fannie Mae chief executive officer Hugh Frater in the report.

The mortgage agency is the largest global green bond issuer in the world over the past 10 years, according to the Climate Bonds Initiative, having issued over US$88bn in multi-family Green mortgage-backed securities since the program began in 2012.

As well as green bonds, Fannie Mae issued its first social bond this year, with a US$315m GeMS issue that was backed by loans tied to affordable housing.

"You can expect more in the year ahead," wrote Frater.

Indeed, the new acting director of the Federal Housing Finance Agency, Sandra Thompson, has made affordable housing and social impact a focus of her early communications with the market.

"Today there is a widespread lack of affordable housing and access to credit, problems that are especially concentrated in communities of color," Thompson said in a virtual session on sustainable home ownership on June 29.

And on Friday, the FHFA released a policy statement on fair lending that includes a requirement for the housing agencies to submit quarterly reports with fair lending information.

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