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Perspectives Blog

Fannie Mae’s Journey to $100 Billion in Green Bonds and What Lies Ahead

December 22, 2021
Michele Evans

Executive Vice President and Head of Multifamily

Recently, Fannie Mae topped $100 billion of Multifamily Green Mortgage-Backed Securities (MBS) issued. This milestone demonstrates how we, along with our lender and investor partners, are transforming housing finance by building liquidity to support the greening of U.S. housing and the reduction of the sector’s carbon footprint. Through our Green Financing efforts, we encourage the building, heating, cooling, powering, and water consumption of multifamily properties in more efficient ways to improve environmental sustainability in the properties we finance and the communities we serve.

With this milestone, we have put $100 billion to work in ways that make a difference to individuals and families. Green financing benefits Fannie Mae and the broader housing finance system because it promotes cost-effective properties for owners, and more sustainable housing communities overall. Notably, our Green MBS have helped lower projected utility costs for tenants, supporting our mission to keep rental housing affordable. We believe these energy- and water-related capital improvements enhance the quality of our Multifamily guaranty book of business, which in turn can help reduce risk for Fannie Mae.

Our Green Multifamily Finance products, adopted by the market through our Delegated Underwriting and Servicing (DUS®) lender network, have helped preserve existing housing stock and support our ongoing efforts to bolster the nation’s supply of housing affordable to low- and moderate-income households. Fannie Mae offers two products to drive the greening of multifamily housing. Our Green Rewards product provides incentives for borrowers to make property improvements that target specific reductions in energy and water use and/or generation of renewable energy. Our Green Building Certification product offers incentives for borrowers with multifamily properties that possess an eligible, nationally recognized green building certification. These products provide our DUS lender partners options to support borrowers who want to address affordable and environmental needs in multifamily housing.

Our investor partners are typically drawn to Fannie Mae MBS due to our prudent underwriting guidelines, our guaranty of timely principal and interest, the predictable cash flows, and the overall liquidity of the securities. Fannie Mae’s Green Bonds provide those same benefits, while also providing quantifiable impact from the investment. Socially responsible investors are attracted to our Green MBS due to the published frameworks aligned to global standards and second-party ratings of those frameworks, as well as the transparency of our program. To support investor decision-making, we provide green-specific disclosures, projected CUSIP-level impacts, and a transparent impact methodology.

Fannie Mae’s Green Financing Business has expanded the pool of investors who purchase MBS backed by multifamily loans, helping deepen the pool of liquidity for the market. Over the past decade, our issuances have attracted environmental, social, and governance (ESG)-minded investors who previously did not participate in agency commercial MBS. We have seen existing Fannie Mae GeMS (Guaranteed Multifamily Structures) investors create ESG funds and expand into socially responsible investments.

Our efforts to reduce housing’s carbon footprint won’t stop here.

Looking ahead, we are committed to continuing to drive innovation in the multifamily marketplace and improve positive environmental and affordability impact. We are working to boost the consistency and quality of the data available in the green bond space. From whole building utility data to source energy composition to measurement and verification of energy and water improvements, we are working with our network of lenders and our energy auditor partners to provide the market the clearest picture of building performance and greenhouse gas emissions (GHG) avoided.

Meanwhile, we have taken what we learned in the development of our Multifamily Green Financing Business and directed it to support energy-efficient single-family homes. In April 2020, Fannie Mae launched Green MBS backed by newly constructed single-family residential homes with green building certifications that meet or exceed the national program requirements for ENERGY STAR® 3.0 Certified Homes.

As is the case with our Multifamily Green Finance efforts, the growth of this program and its acceptance in the marketplace was a result of the education and marketing conducted by our lender partners.

Since inception, we have issued nearly 50 single-family Green MBS transactions backed by loans for newly built single-family homes totaling more than $600 million. 

Our efforts over the last decade in the Multifamily market that led us to this $100 billion milestone and these first steps in Single-Family are a reflection of Fannie Mae’s commitment to creating positive impact and aligning our business activities with measurable ESG outcomes.

We are committed to continuing to leverage our position in the marketplace to power substantial growth of an active, global green bond market that aims to reduce the environmental impact of the housing sector and support more affordable and sustainable communities throughout the United States.