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The World’s Largest Investors Are Going Big On Green Debt As Demand Grows

The Cabot

Some of the world’s biggest investors are tapping into the growing demand for “green” real estate loans, an area where there is growing demand from both the buyers of real estate and the debt providers that fund purchases.

In the past two weeks alone, four new debt packages focussing on environmental sustainability have been secured by borrowers totalling $1.85B (£1.35B), and there was demand from debt providers to provide almost triple this amount.

Asia’s largest REIT, Link, said in January that it had converted a loan secured against its debut London office purchase to a new £200M sustainability-linked loan. The five-year loan is provided by BNP Paribas and DBS and is secured against the Cabot, an office building Link bought in 2020.

The loan incentivises sustainable practices at the building by offering a lower interest rate margin if certain sustainability milestones are hit. The building has a BREEAM rating of very good.

Last month, a fund managed by CBRE Global Investors issued a €500M green bond that it will use to invest in green projects across Europe. CBRE GI said there was demand for the bonds totalling €1.7B and that it was the first time a real estate fund had issued a green bond, meaning that other funds should be able to follow suit. 

And this week, Atrium European Real Estate, the central and eastern European shopping centre investor owned by giant Israeli firm Gazit, also issued a green bond, totalling €300M. It said it received demand for €1.2B of the bonds. It will use the funds to upgrade the sustainability of its existing schemes in line with a green financing framework it had put in place. 

On the lender side, in January German specialist real estate bank PBB placed a €500M green bond, with demand from investors totalling €1.3B. PBB takes the money raised through the green bond and using it to make loans to sustainable properties. 

In 2020, international investors including Brookfield, Lendlease and Tritax all issued green bonds for the first time.