While sustainable finance has largely focused on providing financial products and tools to investors and businesses, we’re beginning to see more opportunities arise for consumers to support and shape the development of a more sustainable economy. One example of this is the emergence of the so-called “green” mortgage, a loan product that allows borrowers to reduce their utility bill costs by allowing them to finance the cost of incorporating energy-efficient features into a new housing purchase or the refinancing of existing housing.
Building on this concept, Carbon Credit Capital (CCC) and Residential Home Funding Corp. of America (RHF) have developed and brought to market a new mortgage product that mirrors its generic counterparts save one key difference. The Carbon Neutral Mortgage ensures that the fees borrowers typically pay to banks and underwriters upon closing their loans are instead put towards carbon offset projects to fully mitigate the projected carbon footprint of owning and operating the home, for the life of the loan.
CCC and RHF put together a package of carbon credits for borrowers equal to the estimated amount of carbon emitted by a similarly sized house over the course of one year, and subsequently, the life of the loan. Calculations are based on square footage and state energy data. The Carbon Neutral Mortgage is currently available in New Jersey, and is expected to expand to more states later this year.
When borrowers close a Carbon Neutral Mortgage, they receive acknowledgement, personalized certification and have a specified number of carbon offsets removed from circulation in the global carbon markets and “retired” in their name — meaning that they, and only they, can ever get credit for reducing those emissions.
The carbon credits included in each package are vetted by Gold Standard, Voluntary Carbon Standard and the Clean Development Mechanism.
To incentivize borrowers to choose a Carbon Neutral Mortgage over a conventional option, CCC and RHF are waiving lender fees and guaranteeing savings of at least $100 by using a mix of carbon credit projects at different price points.
According to the two organizations, each RHF Carbon Neutral Mortgage amounts to an estimated 100 – 350 metric tons of CO2 emissions. Through the new partnership, CCC and RHF expect to deliver tens of thousands of tons of CO2 emission reductions every year.