Helping the housing industry with Sustainable Mortgage Bonds

There are 2 main challenges facing the housing industry in Canada. We are working with housing advocates, developers and investors to meet these challenges head on.

Our current challenges are:

1. large funding gap for affordable housing
2. the environmental impact of the housing sector on climate change

We studied sustainable mortgage bonds and their potential implications for the housing industry in Canada to address these challenges:

• sustainable bond trends, foundational knowledge and lessons from global sustainable bond frameworks
• expected performance, invertors’ expectations and the general value that these bonds can offer to the housing sector
• high-level environmental and social eligibility criteria that could be considered by issuers, developers and housing proponents
• potential role of government to support the growth of this market and the realization of social and green outcomes

Our objectives were to:

• explain the opportunities presented by sustainable mortgage bonds in Canada.
• raise awareness of their positive environmental, social and economic impacts to the housing sector and populations that are vulnerable.
• explore the applicability to the Canadian context and considerations for the role government

Based on our finding, we have released 3 Research Insights on sustainable mortgage bonds. They are:

• Sustainable Mortgage Bonds — Why are they so relevant to the housing industry in Canada? (PDF)
• Sustainable Mortgage Bonds — Expected performance, investors’ motivations and econometric analysis (PDF)
• Sustainable Criteria for residential projects and the role of government (PDF)

The series has demonstrated that sustainable mortgage bonds can be a catalyst to address the affordable housing gap. It also demonstrated that they can assist with the climate change challenge in Canada.

The reports have indicated that:

• Sustainable Mortgage Bonds are gaining momentum as several Canadian institutions are issuing or planning to issue green, social and sustainable bonds. These bonds can bring positive green, social and economic outcomes to the housing sector as they continue to grow and become mainstream.
• The appetite for these bonds in Canada is expected to continue growing as investors, developers and housing proponents become more familiar with this market. Its success will depend on the ability of issuers, developers and housing proponents to understand investor’s motivations and expectations.
• Expected outcomes can result in an increased supply of affordable housing, more affordable rents, and energy consumption savings in the medium to long term. The higher the volume of environmental, social, governance bonds, the larger the impact that can be expected on the housing sector.

The government can explore various options to support the growth of the environmental, social, governance bond market. Some of these options include raising awareness, developing guidelines, setting best principles/practices and potentially taking a more active role by providing government guarantees and/or establishing a sizable public environmental, social, governance framework.

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Related Links

• Housing Finance System
• National Housing Strategy