There is growing interest and demand among capital markets investors for environmental, social, and governance (ESG) investment options and “green” securities. Financial institutions representing over $18 trillion globally recently committed to align their portfolios with the goals of the Paris Agreement, but they lack sufficient market-ready green investments to fully make this shift. The mortgage industry is well-positioned to help fill this gap. RMI has released a report “Build Back Better Homes – How to Unlock America’s Single-Family Green Mortgage Market”. The report proposes practical solutions to reduce friction in originating and securitizing single-family green mortgage products already offered by government-sponsored enterprises Fannie Mae and Freddie Mac to create an estimated new $2+ trillion market within a decade. In the report RMI states “Mortgages can become a primary investment vehicle for deploying billions of dollars to meet this investor demand while also fulfilling consumer demand for green home improvements. Although the market for multifamily green mortgage-backed securities has grown tremendously (making Fannie Mae the largest green bond issuer in the world for the fourth consecutive year in 2020), the single-family market has only just begun to emerge as a destination for green capital.” The report offers: • A framework and qualification criteria for the Fannie Mae and Freddie Mac to structure single-family green mortgage-backed securities. This would allow green mortgages for retrofitting existing homes and for high-performing new construction to be converted into a massive new green bond market. • Suggested methods for Fannie Mae and Freddie Mac and lenders to scale single-family green mortgages. These include leveraging energy performance home data in underwriting and appraisal processes to enable greater market efficiency and automating systems to reduce existing burdens on lenders and appraisers. • Opportunities for federal regulators and policymakers to support these goals, including by ensuring information transparency to correct major market failures and by climate-aligning Fannie Mae and Freddie Mac lending activities. The report projects the following 10-year impacts of scaling up single-family green mortgages: To download the report click on Build Back Better Homes – How to Unlock America’s Single-Family Green Mortgage Market RMI is an independent nonprofit founded in 1982 that transforms global energy systems through market-driven solutions to align with a 1.5°C future and secure a clean, prosperous, zero-carbon future for all. We work in the world’s most critical geographies and engage businesses, policymakers, communities, and NGOs to identify and scale energy system interventions that will cut greenhouse gas emissions at least 50 percent by 2030.
