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Multifamily | June 07, 2021

Impact Bonds Are Supercharging Our Mission

Robert Koontz
By
Robert Koontz, SVP Multifamily Capital Markets

As investors increasingly look beyond yield, Freddie Mac Multifamily has created a lineup of Impact Bonds designed to capture their attention. From Green Bonds to Sustainability Bonds to Social Bonds, these Impact Bonds support our most mission-driven work. We've issued more than $5 billion of Multifamily securities through these vehicles in the last two years alone, and we're just getting started.

The opportunity is tremendous. Inflows to Environmental, Social and Governance (ESG) fixed-income funds are outpacing broader market funds five times over, and today, there is already nearly $40 trillion in fixed-income assets invested using ESG integration strategies. As a mission-driven company, we're perfectly situated to help meet some of that demand.

A great example is our upcoming Social Impact Bond offering. This summer, Freddie Mac will issue $230 million in Social Bonds that support 1,267 rental homes across 39 states and the District of Columbia for individuals with intellectual and developmental disabilities. Working together with our partners, Freddie Mac provided debt financing designed to address the significant shortage of community-based homes that are accessible to this unique and underserved population.

Those who invest in these specific Social Bonds will be supporting affordable housing that allows individuals with disabilities to live and work within their communities. That's because these rental properties provide access to crucial support structures, including wheelchair access and 24-hour staff. This "deinstitutionalization" of care has been the goal of advocates for decades, and the Optigo® network, from end to end, is making it a reality.  

Another example of where bond buyers are having an impact is through our Sustainability Bonds. The inaugural offering K-SG01 provided $579 million for rental properties that serve low- to moderate-income families.

Of the units Freddie Mac has helped finance so far through Sustainability Bonds, 73% are affordable to families earning 60% area median income (AMI) or less. Investors in these bonds help contribute to residents' economic upward mobility, with a large percentage of the bonds backing mixed-income properties. Mixed-income housing helps to deconcentrate poverty and provides access to neighborhoods of opportunity for low- and moderate-income residents. This type of housing creates economic diversity and expands the availability of quality, affordable housing throughout an area.

The oldest component of our Impact Bonds lineup is Green Bonds. Launched in 2019, Freddie Mac has already issued $3.3 billion through our K-G and Multi PC® deals to support debt financing to borrowers of multifamily properties that agree to make a minimum percentage of energy and water efficiency improvements at their properties. Beyond the environmental impact, these investments help improve renters' bottom lines through lower utility costs.

In total, our Green Bonds are projected to decrease annual greenhouse gas emissions by nearly 21,400 metric tons, and we'll save over 370 million gallons of water per year, saving renters an average of $261 per year in the process.

There is no question that investors looking to foster positive change through investments that meet ESG criteria will find exceptional opportunities through Freddie Mac's Impact Bonds.

As we look ahead, we hope to continue growing these offerings as they become an even more important part of Freddie Mac's business.