AFME published a new paper outlining the role securitisation can play in developing sustainable finance, in particular in a post-pandemic economic recovery.
By pooling together ESG loans
which are then financed by more liquid securities, securitisation gives
investors access to sustainable investments financing newly built energy
efficient houses, residential and commercial rooftop solar energy
loans, loans for home insulation, SME loans for sustainable projects,
among other projects.
The report also highlighted that Asset Backed Commercial Paper (ABCP)
programmes – a type of short-term securitisation funding - will also
play an important role in (re)financing assets that provide
environmental benefits, especially transitional assets.
Anna Bak, Associate Director of Securitisation at AFME, said:
“It is increasingly evident that the hoped-for economic recovery is
an opportunity to promote a restructuring of economic activity and
business models in line with the objectives of sustainability and the
Green Deal. The pandemic has also put a greater spotlight on social
finance (the “S” in ESG) with the issuance of bonds which help finance
the efforts to fight the pandemic. This process will no doubt require
additional, substantial funding, and that’s where securitisations can
play an important role in financing the transition to sustainable
finance.”
The paper also discusses the current regulatory status of the
disclosure and due diligence requirements for securitisation, which ESG
factors are important in the context of securitisation, and provides a
suggested framework for market participants’ ESG due diligence with
respect to securitisation transactions.
AFME
© AFME
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