Ziegler recently priced $297.03 million of tax-exempt bonds for Enso Village, a new community in Healdsburg, California, sponsored by The Kendal Corporation--headquartered in Pennsylvania--and the San Francisco Zen Center. Despite the pandemic and the challenges of the past year, the Kendal team was able to garner significant attention among prospective residents and hit 95% presales in a record nine months! These advanced depositors were all garnered through virtual techniques during a very difficult time for the sector. This commitment towards growth and looking beyond the pandemic is a noteworthy achievement. 

One of the unique elements of this transaction is the use of designated green bonds, the first of their kind in the nonprofit senior living sector! This issuance typifies an overall trend in sustainability bonds, which are further designated as either green bonds or social bonds. Proceeds of green bonds exclusively finance or refinance projects with environmental benefits and/or projects generating positive social outcomes.

Ziegler sees green bonds as an area for great opportunity within the senior living and care industry, as providers look to develop new projects or renovate existing communities. Sustainability resonates significantly with the next generation of residents and can also help with recruitment, as staff look to be part of environmentally and socially conscious organizations.

Additionally, climate change concerns have led to increasing prominence of ESG-focused funds (environmental, social, and governance) within the institutional investor community, focusing on the direct investment in ESG bonds and other social impact investments. Investors strongly supported Enso Village's green bonds, with the issue 7.5 times oversubscribed and a number of nontraditional senior living investors purchasing bonds specifically because of the green bond designation. The approach to financing Enso Village was not only innovative, but also in alignment with the increasingly important role of sustainability.

Exploring sustainability bonds

So, what is involved in getting a green bond or social bond designation? It is important to first keep in mind that pursuing these types of designations starts with a commitment and vision for an environmentally or socially responsible project. Enso Village's sponsors were committed from day one to building an environmentally conscious community, including elements such as sustainability in design, environmentally sensitive approaches to composting, electric charging stations, geothermal heating systems, tree planting programs, and water management techniques, among others. The green bond designation acknowledged an already-established vision and set of guiding principles for Enso Village.

Obtaining green bond or social bond designation requires an outside second-party opinion, also known as an SPO. A few key groups provide these assessments and final recommendations for designation. These entities conduct their assessments and issue final reports that evaluate projects against a set of core principles established by the Climate Bond Institute. It is important to note that obtaining this designation also requires ongoing monitoring and a long-term commitment to operating under the principles of the green bonds or social bonds. The pledge goes beyond just the upfront designation prior to bond issuance.

ESG bond issuance has grown notably in recent years and it is projected to increase further. We envision that as providers continue to engage in smart development efforts, whether through campus expansions or new development, that environmentally conscious design and operations will increase. Ziegler anticipates continued opportunities for nonprofit senior living organizations to pursue this designation in connection with financings in the years ahead.