A panel discussion during Nareit’s REITworks: 2020 Virtual Conference looked at the growing appeal of green bonds.
Chrissa Pagitsas, head of enterprise environmental, social, and governance (ESG) for Fannie Mae, moderated the panel, which included Marilyn Ceci, managing director, global head of ESG debt capital markets at JP Morgan, and Sara Neff, SVP, sustainability at Kilroy Realty Corp. (NYSE: KRC).
Pagitsas outlined Fannie Mae’s involvement in the green bond arena, noting that it issued its first green bond in 2012 for an affordable housing property with LEED certification. By the end of 2019, Fannie Mae had issued over $79 billion in green bonds, she said. “We’re very much committed to this space.”
REITs account for 7% of the entire green bond market globally, Ceci said. “REITs are in a very good position. Investors are keen to buy the bonds, so it really is a wonderful opportunity,” she said. On the question of investor appetite, Ceci said the “deepest pockets by far” are insurance companies and pension funds.
Neff noted that one of the benefits for Kilroy in issuing green bonds was expanding its book of investors. As for whether Kilroy saw a pricing bump when it issued green bonds, “a lot of factors determine if there’s going to be a premium and we don’t feel like we’ve seen it on ours, but that isn’t a reason not to do it,” she said.
Pagitsas agreed, saying that while a premium is “nice, the very first step is having access to investors who may not have spoken to you before. Building those relationships are critical to your long term survival as a company…you’re signaling something new with your green bond and you’ve got their attention and brought them to the table.”
Ceci emphasized the importance for companies to know who they plan to target with their green bonds and how they want to be perceived in the market. “I’ve never run into an issuer who’s regretted doing a green bond,” she said.
Meanwhile, Neff stressed the importance for companies to keep their green bond framework as inclusive as possible on eligible projects.