Key Takeaways
- • Digital Realty Trust was the first company to issue a green bond in the data center sector, in 2015, and has since issued a cumulative $6.0 billion in green bonds, including $4.3 billion issued in 2020 and early 2021.
- • Green bond proceeds fund green buildings, renewable energy and energy efficiency projects, with the company's framework requiring a minimum 15% energy savings per project.
- • Per Nareit's 2022 REIT Industry ESG Report case study, the bond-funded projects have avoided 1.7 million MTCO2e of emissions, produced 1.3 million MWh of renewable energy, saved 22,000 kGal of water and supported 10,000 jobs.
- • Digital Realty plans to shift toward sustainability-linked bonds, which would tie fundraising to a range of ESG performance targets rather than dollar-for-dollar green use of proceeds.
Summary
Digital Realty Trust, Inc., a leading issuer of green bonds in the data center industry, is evaluating green bonds as a cost-effective way to fund business growth through sustainable projects. According to a case study published by Nareit in its 2022 REIT Industry ESG Report, the company was the first in the data center sector to issue a green bond, in 2015. Since then it has issued a cumulative $6.0 billion in green bonds, $4.3 billion of which came in 2020 and early 2021. The proceeds support green building development, renewable energy implementation and energy efficiency projects.
The program has also driven operational discipline. The company's green bond framework requires a minimum of 15% energy savings per project, which has acted as a catalyst for more detailed tracking and monitoring of energy usage. The case study credits the bond-funded green building and energy projects with avoiding 1.7 million metric tons of CO2 equivalent, equal to the annual emissions of roughly 370,000 passenger vehicles, and producing 1.3 million MWh of renewable energy, enough to power more than 110,000 homes for a year. It also reports 22,000 kGal of water saved and 10,000 jobs supported.
The green bond process has encouraged cross-functional collaboration across finance, design and construction, energy operations and sustainability teams. Mike Brown, Senior Vice President, Treasury at Digital Realty, said sustainability has become integral both to building and operating the business and to financing it, and that finance and sustainability teams must continue to work closely together.
Looking ahead, Digital Realty foresees a shift toward sustainability-linked bonds. Unlike green bonds, which follow a dollar-for-dollar use-of-proceeds format, sustainability-linked bonds would allow fundraising tied to performance against a range of environmental, social and governance targets. The company operates more than 290 facilities in 49 metros across 24 countries on six continents.
The program has also driven operational discipline. The company's green bond framework requires a minimum of 15% energy savings per project, which has acted as a catalyst for more detailed tracking and monitoring of energy usage. The case study credits the bond-funded green building and energy projects with avoiding 1.7 million metric tons of CO2 equivalent, equal to the annual emissions of roughly 370,000 passenger vehicles, and producing 1.3 million MWh of renewable energy, enough to power more than 110,000 homes for a year. It also reports 22,000 kGal of water saved and 10,000 jobs supported.
The green bond process has encouraged cross-functional collaboration across finance, design and construction, energy operations and sustainability teams. Mike Brown, Senior Vice President, Treasury at Digital Realty, said sustainability has become integral both to building and operating the business and to financing it, and that finance and sustainability teams must continue to work closely together.
Looking ahead, Digital Realty foresees a shift toward sustainability-linked bonds. Unlike green bonds, which follow a dollar-for-dollar use-of-proceeds format, sustainability-linked bonds would allow fundraising tied to performance against a range of environmental, social and governance targets. The company operates more than 290 facilities in 49 metros across 24 countries on six continents.
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