Feb 23, 2024

ESG Integration with Debt

Since our founding, The Green Cities Company has recognized the overlay of environmental stewardship, social impact, and fiduciary results. Defined by our proprietary Green Cities Index, our approach includes a holistic focus on Environmental Impact, Climate Change Mitigation, Resilience, Health & Wellbeing, and Equitable Communities.

Through our multifamily equity investments, we have demonstrated the power of ESG to create meaningful – and financially powerful – experiences of sustainability, health, and community for our tenants. Through our Debt originations, Green Cities additionally recognizes that all capital partners can contribute to ESG value drivers, using ESG as an opportunity to negotiate key items into the physical improvements required of the loan as well as act as a mentor to our borrowers throughout their loan period on ESG best practices.

We share with our borrowers the key elements of Green Cities’ robust ESG Playbook, advancing current performance and future value through initiatives such as developing detailed Climate Action plans, energy and water management, dedication to air quality, preservation of acoustic and thermal comfort, access to health, use of non-toxic and low-carbon materials, designing with biophilic and inclusivity principles, and a wide variety of other approaches that reduce operational cost, enhance tenant retention, support rent premia, and contribute to greater disposition values.

This approach to underwriting is unique in the credit market: underscoring stronger asset performance with ESG advancement. Traditionally, lenders have not incorporated loan proceeds or supported borrowers for ESG-related capital improvements. However, we believe this strategy is not only responsible but a critical factor in mitigating risk and driving returns.

The original article was published by IREI and GRESB on February 23, 2024 in the “ESG Means Business, Winter 2024”, issue.