Skip to main content
Top Button
The Greenhouse Effect: ESG Labeling in Housing Finance The Greenhouse Effect: ESG Labeling in Housing Finance

The Greenhouse Effect: ESG Labeling in Housing Finance

State and local government bonds are a vital component of affordable housing: both single family housing mortgages and multifamily housing projects are financed with this type of debt. Of course, many developers understand that tax-exempt multifamily housing bonds are essential to unlocking four-percent tax credits.[1]  With respect to the marketing and sale of these bonds, over the last five years, “green” and “social” bond labeling has made its way from its beginnings in utility and infrastructure finance into single family and multifamily housing revenue bonds. This is not surprising given (1) evidence of pricing effects due to climate change;[2] and (2) the recent focus by institutional investors on integration of climate criteria as a portfolio risk mitigation strategy.[3]  A survey of institutional investors found such investors believe that climate change has “financial implications for their portfolio . . . and that these risks, particularly regulatory risks, already have begun to materialize.”[4]  In fact, the Climate Bond Initiative’s Sustainable Debt Global State of the Market H1 2020 states that “labelled securities will continue to play a major role.”[5]

Click here to read the full article written by Tyler J. Kalachnik for the American Bar Association's Journal of Affordable Housing and Community Development.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.

[1.] See 26 U.S.C. § 42(h)(4).
[2.] See Asaf Bernstein, Matthew T. Gustafson & Ryan Lewis, Abstract, Disaster on the Horizon: The Price Effect of Sea Level Rise, 134 J. Fin. Econ. 253 (2019).
[3.] Philipp Krueger, Zacharias Sautner & Laura T. Starks, The Importance of Climate Risk for Institutional Investors 2 (Swiss Fin. Inst. Research Paper No. 18-58 Eur. Corp. Governance Inst., Finance Working Paper No. 610, 2019).
[4.] Id.
[5.] Miguel Almeida et al., Climate Bonds Initiative, Sustainable Deft Global State of the Market H1 2020, at 7 (2020).
View Full Site View Mobile Optimized