The third meeting of the GRESB Green Bond Working Group (GBWG) addressed the costs and benefits of green bond issuance and investment. GRESB presented original research on the performance of corporate real estate green bonds, sharing its findings on the quantitative costs and benefits identified, to date.

1. The costs and benefits of green
bond issuance and investment
GRESB Green Bond Working Group
Third meeting
© 2015 GRESB B.V.

2. Background: cross sector research
Performance based studies
Minimal research on green bond performance- Bloomberg
(2014) and Barclays (Sept. 2015)
Bloombergstudy found no systematic spread differential at
issue, nor spread tighteningover time
Barclays study suggests investorspay a green premium of 16-
18 bps compared to grey (or non-green) bonds. Green bonds
may be less risky/volatilethan grey bonds
Both studies based on self-constructed green bond indices;
neither bond nor industry specific
1

3. Introduction: real estate corporates
Performance based studies
No publicly availableresearchfocusedon real estate specific
issuers
7 unique issuers within CRE universe
Only 3 of 7 have issued more than one green bond
Green bonds tend to fit within each issuer’s overalldebt
structure:
Rate type: fixed or floating (majority are fixed)
Issue amount: in line with grey bond issues
Market: currency and market consistent
Closer look at 12 bond pairs from 4 unique CRE issuers
2

4. Coupons
Within CRE green bond universe- 7 unique issuers
3 usable pairs from unique
issuers illustrategreen
coupons > grey coupons
Pairs defined-grey/green
bond with similar issue date
and maturity (< 2 months)
When issue/maturity range
is expanded to 6 months,
green coupons are higher in
60%, lower in 40% of pairs
3
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Issuer (I) Issuer (II) Issuer (III)
Coupon
Grey
Green

5. Volatilities
Within CRE green bond universe- 7 unique issuers
4
Green/grey bond pairs from
2 unique CRE issuers
Pairwise analysis suggests:
Green bond volatilities are
equal or greater than same
issuer grey (or non-green)
bonds
Inconclusive pattern
0
1
2
3
4
5
6
7
8
Green (Pair 1) Grey (Pair 1) Green (Pair 2) Grey (Pair 2)
-1m
-2m
-3m

6. Yields: issuer-specific term structure
Within CRE green bond universe- 7 unique issuers
5
Single exampleof CRE
issuer term structure
Similarly, for majority of CRE
issuers, green bond yields
are above grey bond trend
line
This trend was persistent for
almost all (6/7) CRE issuers
since Q2 2015
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
0 5 10 15 20
Yield
Adjusted maturity
Green
Grey
Expon.
(Grey)

7. Within CRE green bond universe- 7 unique issuers
6
0.6
0.65
0.7
0.75
0.8
0.85
0.9
0.95
12/4/15 12/11/15 12/18/15 12/25/15 1/1/16
Grey
Green
3.9
4
4.1
4.2
4.3
4.4
4.5
12/4/15 12/11/15 12/18/15 12/25/15 1/1/16
Grey
Green
Pairwise analysis suggest that higher yields are not persistent
in all cases at all times.
Yields: pair comparison for 2 unique issuers
Issuer 1 Issuer 2

8. Conclusion
Within CRE green bond universe- 7 unique issuers
CRE green bond issues fit within the overall bond strategyof
each issuer (amounts,rate types,currencies, markets)
Although some CRE issuers have realizedlower pricing
(coupons) for green vs. correspondinggrey issues, pairwise
analysis finds opposite result
Higher volatilities may be due to stronginvestor demand and
buy and hold strategies
Issuer specific term structurehints at higher green yields, but
pairwise comparison is inconclusive
7

9. Questions & Comments
?
www.gresb.com
s.anzinger@gresb.com
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