Green bonds – bonds issued to fund sustainable investments – are growing in the global real estate sector. In a commentary for a leading sustainability specialist, Blue & Green Tomorrow, Eric Tanguy, Senior Director at S&P Global Ratings, suggests that green bonds are increasingly aligning the interests of commercial real estate tenants, commercial real estate companies (CREs), and investors.
Commercial real estate tenants – often larger corporations – are intensifying their efforts to rent more environmentally friendly and energy-efficient properties in order to reduce operational costs and show their dedication to climate change. Through green bonds, CREs can finance and improve their portfolios to include ‘green’ certified properties and meet tenants’ growing demand for environmentally sustainable assets. Investors, meanwhile, can act on their growing appetite for sustainable debt instruments and support a sustainable economy.
Tanguy explains, however, that although green bonds have made considerable progress in the real estate sector, a lack of market standardisation prevents green bonds from a higher rate of issuance by CREs. This is because documenting, reporting and ensuring the ‘greenness’ of a bond requires third-party certifications and secondary opinions – limiting green bond issuance to larger CREs that can afford these additional expenses.
For this reason, S&P has developed its ‘Green Bond Evaluation’ tool, which aims bring clarity and increased standardisation to the green bond market.
The full article can be read here.