One of Fannie Mae’s Green GeMS REMICs has been included in the Bloomberg Barclays MSCI Green Bond Index, the government-sponsored enterprise said Wednesday.
It’s another measure of growing acceptance for the program by lenders, borrowers and investors. Investment funds that track the index will want to acquire the security, or others that provide similar exposure.
Dan Dresser, vice president of multifamily capital market at Fannie, called the incorporation "another sign of the market’s maturation and a significant recognition that will help attract a broader investor audience.”
Fannie introduced green financing products in 2011, and has only been securitizing them for three years. In 2017, the GSE issued $27.6 billion in Green MBS backed by either green building certified properties or properties targeting a reduction in energy or water consumption, up from $3.6 billion in 2016 and $111 million in 2015. As with all commercial mortgages, the GSE securitizes each loan individually.
The company only priced its first GeMS REMIC, or resecuritization, with tranches backed exclusively by its Green MBS collateral in February 2017.
The particular Green GeMS REMIC that was included in Barclays MSCI Green Bond Index, a $495 million tranche of the $1.6 billion FNA 2017-M15, is backed exclusively by loans on green building certified properties, however. It does not include loans that help borrowers make energy and water efficiency upgrades on older buildings.
“This is one step in our attempt to integrate MBS and green financing,” said Lisa Bozzelli, director, multifamily capital markets and pricing. “We hope to create a more liquid borrowing environment and more opportunities for investors.”
Bozzelli said the next step is to try to get a third-party index comfortable with Fannie’s green rewards program, which targets a 25% reduction in a building’s energy or water consumption.
“There are more opportunities for energy consumption reduction in the older buildings where appliances and fixtures predate ENERGY STAR standards,” she said.
“This has been more difficult because there does not seem to be anyone with a similar program. Fannie Mae is trying to build awareness by going to networking at conferences and engaging with third-party validators to demonstrate how its programs comply with green bond principles.”
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Corrected March 15, 2018 at 9:27AM: The story was updated to clarify that a single tranche of FNA 2017-M15, and not the entire deal, was included in the index.