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Green bonds raise capital exclusively for projects that address environmental or climate concerns. In commercial real estate, green bonds can be used, for example, to fund significant upfront capital investments that are needed to renovate or retrofit existing buildings to meet decarbonization goals.

Publicly traded U.S. real estate investment trusts were slow to adopt green bonds but issuance has exploded over the past five years. Investors’ increased desire to make their properties more appealing to tenants and capital sources was the initial impetus for this trend. Moving ahead, we expect the Securities and Exchange Commission’s proposed ESG disclosure requirements, if adopted, to kick green bond issuance into an even higher gear.