Collateral

Financial system

Interest rate

Secondary mortgage market

Economics

Computer science

Business

Bond market

Insurance policy

Leverage (statistics)

Debt

Loan

Casualty insurance

Bond

Finance

Mortgage insurance

Machine learning

Journal of Cleaner Production

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 that incentivize energy efficiency in multifamily buildings 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, yet 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.

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