Banker Sees REIT Green Bonds as “Natural Byproduct” of Sustainability Commitment

Shawn Cepeda, managing director of debt capital markets at Bank of America Merrill Lynch, joined REIT.com for a video interview at NAREIT’s 2015 Leader in the Light Working Forum in Reston, Va.

According to Cepeda, sustainability for most companies is comprised of environmental responsibility, social responsibility and corporate governance. When Bank of America Merrill Lynch makes a decision about financing sustainability, “we’re really focused on the environmental element of the sustainability umbrella,” according to Cepeda.

“For real estate specifically, we’re talking about financing energy efficient buildings,” he said.

Cepeda was asked whether he envisions green bonds becoming more popular. According to Cepeda, if a real estate company adopts sustainability as part of their mission statement, “we think green bonds are a natural byproduct of that overall commitment.” Ultimately, he added, a green bond allows a company to showcase its sustainability initiatives in the capital markets more generally.

Meanwhile, Cepeda also offered an overview of growth in the green bond sector.

“The asset class has grown tremendously in the last couple of years,” according to Cepeda. In 2013, global green bond issuance totaled $19 billion. By 2014, that amount rose to about $35 billion, he noted.

Cepeda pointed to a number of “significant breakthroughs” for green bonds in 2014, including the decision by Regency Centers Corp. (NYSE:  REG) and Vornado Realty Trust (NYSE: VNO) to pioneer the sale of green bonds in the U.S. market.

“We like to think that the application will grow in the REIT space more generally. It’s not easy being the first,” Cepeda said.

Cepeda also observed that green bonds will likely become increasingly popular across a wide range of industries, not just real estate. At the same time, he said, state and local governments have also begun to embrace the concept.