Environmental Finance's Sustainable Debt Awards 2024

Sustainability bond of the year - agency: Freddie Mac

At a time of ballooning housing costs around the world, the financing of affordable housing assumes increased importance – and a $218 million Sustainability Bond issued last year promised dual social and environmental benefits.

The securitisation by Freddie Mac financed 14 loans – each of which have Low-Income Housing Tax Credits, “preserving affordability for residents of the properties,” the issuer said.

“Freddie Mac’s Impact Bonds support our broader mission to finance quality, affordable rental housing,” said Robert Koontz, senior vice president for capital markets at Freddie Mac Multifamily. “Housing that is affordable and also contributes to addressing environmental or social challenges is a win-win that we are proud to support alongside like-minded investors.”

Of the 2,397 units, 1,844 (76.9%) are affordable to tenants earning at or less than 60% area median income (AMI) and 1,947 units (81.2%) are affordable to tenants earning at or less than 80% AMI, the publicly traded, government-sponsored enterprise added.

Source: Freddie Mac

The securitisation also contributed positive environmental benefits, with 13 of the properties located within half a mile of public transport; helping reduce transportation-related emissions - the largest source of US greenhouse gas emissions.

Three of the properties also have a ‘green building’ certification, while three properties have achieved existing energy- and/or water-efficiency improvements, with an average of 25% in energy reductions and 21% in water reductions compared with the baseline, it added.

As of 31 December 2023, Freddie Mac had financed more than 1,280 loans for about $19.8 billion through its Green, Social and Sustainability Bonds.

These bonds can help attract capital to support economic mobility for residents and economic growth for communities, by financing affordable and workforce housing. Additionally, according to the Freddie Mac Sustainability Bonds Framework, the bonds are consistent with UN Sustainable Development Goals 1 (‘No poverty’), 7 (‘Affordable and clean energy’), 10 (‘Reduced inequalities’) and 11 (‘Sustainable cities and communities’).

Deal highlights

Issuer: Freddie Mac
Size: $218 million
Maturity: 25 August, 2040
Initial Coupon: 4.55%
Use of proceeds: Affordable housing, energy efficiency, green buildings, transit oriented development, socioeconomic advancement and empowerment.
External reviewer: Sustainalytics
Lead managers: Wells Fargo Securities; Citigroup Global Markets
Credit rating: AA+ (S&P)