Green Financing and the Triple Bottom Line

Fannie Mae is shaking up the multifamily lending space with industry-leading investment in environmental sustainability, says the GSE's EVP Jeff Hayward.
Jeff Hayward

Jeff Hayward

Triple bottom line, or TBL, is an accounting principle that’s been around since the 1990s. Also called the three Ps (people, planet and profits), TBL recognizes that we’re all in business to make money. But, we can go beyond the traditional profit measures of ROI and shareholder value to include environmental and social dimensions.

In other words, you can do good when you’re doing well. You can make money (profit) while positively and measurably impacting the social bottom line (people) and the environment (planet).

Social Measures

Energy accounts for a substantial share of the cost of living in rental housing, especially among low-income tenants, reports the Joint Center for Housing Studies of Harvard University.

In 2012, Fannie Mae introduced its multifamily green initiative to help owners of apartments and cooperatives make improvements to reduce energy or water consumption by 20 percent or more. Over 80 percent of the units we finance are affordable for working families, and greening those buildings can mean lowering their utility bills.

The cost savings enable tenants to spend more of their hard-earned money on other daily expenses like education, transportation, health care and child care.

Plus, they’re living in housing that’s been upgraded to be more durable. These homes may still draw power from solar panels, even during widespread power outages, for example. And the people living there will be healthier: they’re less likely to have asthma, says the National Center for Healthy Housing.

Green building even creates jobs. As noted by the U.S. Green Building Council, the industry’s direct contribution to U.S. GDP is also expected to reach $303.5 billion between 2015 and 2018.

Environmental Sustainability

Buildings take up a tremendous amount of Earth’s resources. According to the U.S. Environmental Protection Agency, buildings account for:

  • 39 percent of total use of energy from fuel oil, coal and other energy types
  • 68 percent of the total electricity consumption
  • 12 percent of the total water consumption
  • 38 percent of the carbon dioxide emissions

Green buildings are helping to conserve these resources.

Market Momentum

Our organization’s leadership in green financing has transformed the multifamily lending space, creating an ENERGY STAR score for multifamily and issuing the industry’s first Green Real Estate Mortgage Investment Conduit (REMIC), a $1 billion issuance that included two completely green tranches, for $600 million. More recently, we launched a fully green REMIC valued at $900 million.

These bonds attract traditional commercial mortgage bond investors as well as funds solely interested in devoting their dollars to environmentally conscious investments.

We’ve also partnered with industry organizations and stakeholders and our Delegated Underwriting and Servicing (DUS) lenders to promote the program more broadly.

Bright Future

Incorporating green building principles into property improvements enhances the overall quality of the existing multifamily housing stock and has a positive impact on the environment.

Sure, the green multifamily market is still young by industry standards. But, we’re seeing more interest, commitment and growth now than ever before, underscoring the need and desire to do good by doing well.

Jeff Hayward is the executive vice president and head of the multifamily business at Fannie Mae, the largest provider of financing for multifamily apartments in the U.S. In 2012, Fannie Mae introduced green multifamily financing to support properties with green building certifications and investments designed to reduce energy or water consumption by 20 percent or more.