In a session on green bond issuance at Nareit’s REITworks 2021, panelists agreed that green bonds can provide worthwhile advantages for the companies issuing them, but they require additional effort from issuers, both at the time of the offering and long afterward.
“Many investment firms have mandates for green investments, so there is a deeper pool of investor interest in them,” said Jan LaChapelle, executive vice president and head of capital markets at Vornado. She noted that there also is increased demand for green bonds in the CMBS markets, and green projects can help gain pricing advantages in securing revolving loans.
A successful green bond offering, however, requires effective communications in the marketing stage to demonstrate to investors the value of the sustainability projects the bonds will pay for. It also requires painstaking record keeping and detailed reporting over the life of the bond to document that the funds raised were used for the green projects described in the offering.
“Vornado issued its first green bond in 2014,” said Dan Egan, senior vice president of energy and sustainability at Vornado. “That $450 million bond meant gathering $450 million of invoices. You have to know how organized your accounts payable system is and whether it can track the use of the proceeds. The paper trail is key to the whole process.”