AFME has today 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.
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