A recent report by S&P Global Ratings reveals that demand for green bonds in the real estate sector has grown rapidly since 2012. While tenants are increasingly interested in environmentally sustainable buildings that consider cost saving programs and energy consumption, investor appetite is driven by green bonds’ potential for high-yields, reduced exposure to regulatory and climate change risk, as well as the opportunity to diversify portfolios.
Yet while market demand is apparent, a lack of standardisation and high issuance costs are limiting green bond issuance – generally only afforded by Real Estate Investment Trusts (REITs) at present.
Therefore, the extent of future green bond success in real estate will likely depend on the development of sector-specific frameworks that limit additional costs and unifying green bond criteria and the commitments for proceeds.
News of the report and its findings were picked up by the specialist investment and energy press, including Environmental Finance (subscription required), Business Green, Blue & Green Tomorrow, Energy Live News, and Funds Europe.