The increasing societal focus on environmental issues has led to diﬀerentiated corporate action as a response. This paper studies the impact of corporate environmental performance on cost of capital, using Real Estate Investment Trusts (REITs) as a laboratory. We document that loans on environmentally certiﬁed buildings command 25-31 basis point lower spreads. At the corporate level, REITs with a higher fraction of environmentally certiﬁed buildings issue bonds at lower spreads, an analysis of bond spreads in the secondary market corroborates this ﬁnding. The results provide evidence on the eﬃciency of the capital market in pricing risk-aﬀecting environmental characteristics.