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ESG Newsletter published on January 5, 2021

Breckinridge Sharpens ESG Focus on Affordable Housing Bonds


  • A dedicated housing framework developed in 2020 strengthened Breckinridge’s environmental, social and governance (ESG) evaluation of bonds targeting affordable housing in the U.S.
  • The framework guides evaluation of the quality of ESG performance at housing finance authorities (HFAs).
  • For investors seeking to align their investments with their charitable intentions and their values, some HFAs prove more effective than others in addressing key affordable housing concerns.

With the establishment of a dedicated housing framework, Breckinridge strengthened its environmental, social and governance (ESG) analysis of housing finance authority (HFA) bonds during 2020. Tax-exempt HFA bonds finance new construction and rehabilitation of affordable housing. 

Breckinridge’s ESG housing framework is designed to support Breckinridge security analysts as they seek to identify best-in-class affordable housing bond issuers. Our framework supports the identification of HFAs that emphasize programs designed to support individuals throughout the cycle of homeownership and address other social obstacles related to housing and housing needs.

Due to their tax advantaged status, the interest rate on tax-exempt bonds typically is lower than conventional bank financing for housing purchases or construction.1 The savings can promote housing affordability through loans that carry lower costs than conventional bank financing.

ESG Factors Support Affordable Housing Goals

To assess the ESG characteristics of HFA bond issuers, we developed a framework that guides evaluation of the quality of ESG programs across an authority’s operations.

We assess the prevalence and effectiveness of environmental programs through HFAs. Analysis of social factors separately assess single-family and multifamily bonds and considers access and assistance efforts. Governance characteristics that we consider among HFAs include operational independence and disclosures.

Identifying best-in-class affordable housing programs

Our best-in-class housing framework becomes the tenth ESG framework we employ across municipal bond sectors in assessing the quality of an issuer’s sustainability performance. In the past, housing assessments were integrated in our city and county framework. We determined that identifying best-in-class HFA issuers required a separate framework that focused on indicators of high-quality HFAs with the most sustainable operations relative to peers.

Our housing framework joins nine additional frameworks: 1) city/county, 2) community/technical colleges, 3) higher education, 4) hospitals, 5) public electric utilities, 6) school districts, 7) state, 8) water & sewer utilities and 9) transportation. When developing the frameworks, our priority always is to identify metrics that would be additive to our research process and most material to credit quality in a specific sector.

HFAs that effectively address key affordable housing concerns by targeting best-in-class ESG characteristics, sustainable strategies and broad social impact efforts may prove particularly appropriate for the portfolios of investors who seek to align their investments with their charitable intentions and their values.

Sustaining affordable housing efforts over time

Our best-in-class approach for affordable housing helps to identify programs that help people throughout the homeownership cycle from renting to buying to staying in their home. In our view, the most creditworthy HFAs demonstrate the capacity to support increased homeownership over the long-term and to sustain their programs across the economic cycle.

The HFAs deemed by the investor community as most effective in executing on their missions will be most likely to continue to successfully attract investor capital through issuance of tax-exempt bonds, in our view. By doing so, high quality HFAs will likely continue to be desirable destinations for home buyers and housing developers seeking assistance and support.


[1] Tax advantages can differ from one investor to another. Consult with a tax professional before taking any investment actions.

DISCLAIMER: The opinions and views expressed are those of Breckinridge Capital Advisors, Inc. They are current as of the date(s) indicated but are subject to change without notice. Any estimates, targets, and projections are based on Breckinridge research, analysis and assumptions. No assurances can be made that any such estimate, target or projection will be accurate; actual results may differ substantially.

Nothing contained herein should be construed or relied upon as financial, legal or tax advice. All investments involve risks, including the loss of principal. Investors should consult with their financial professional before making any investment decisions.

While Breckinridge believes the assessment of ESG criteria can improve overall credit risk analysis, there is no guarantee that integrating ESG analysis will provide improved risk-adjusted returns over any specific time period.

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