Over the last few years, Freddie Mac has been cautiously dipping its toes into the green bond market. The government-backed mortgage company first issued green bonds for energy retrofits at apartment buildings in 2019. In 2021, it expanded into single-family homes, and earlier this month, the company announced it had sold $600 million in such bonds.
Freddie Mac and its sister company Fannie Mae own more than 60 percent of home mortgages in the country. The two firms purchase home loans from lenders, pool them into financial products called mortgage-backed securities, and sell them to investors. When the underlying homes are energy efficient or sustainable in some way, the products are referred to as green bonds. In general, green bonds are supposed to finance sustainable projects and investors likely expect that Freddie Mac’s green bonds drive investment in energy-efficient homes. But the devil is in the details.
For one, the Freddie Mac program enrolls mortgages for homes with rooftop solar panels. In states like California, all new construction must be built with rooftop solar. That means a mor... Read more