AFME has today published a new report entitled "European Green Securitisation Regulatory State of Play". The report sets out a comprehensive overview of the current European regulatory landscape for green securitisation, highlighting the challenges preventing it from fully contributing to Europe’s green transition, as well as the full scale of its potential growth by 2030.
The report shows that the European green securitisation market is lagging behind other global jurisdictions, including:
- In the course of five years, only 24 securitisation transactions with ESG characteristics have been issued.
- Although Europe is a leading region for green and sustainable bonds, Europe’s green securitisation market remains subdued. For instance, between 2019-2022 green securitisation issuance represented only 1.4% of total European green issuance, whereas it accounted for 8.1% in China and 32.3% in the US.
The report also examines the potential scale of future green securitisation issuance by 2030 providing estimates for growth based on data from S&P Global Ratings. The findings are:
- Residential mortgage loans on energy-efficient properties: Gross green mortgage lending could reach €125 billion annually across eight European RMBS markets, i.e. Belgium, France, Ireland, Italy, the Netherlands, Portugal, Spain and the U.K.
- Lending for green home renovation: If residential buildings reach a 3% renovation rate by 2030, this could generate an annual funding requirement of about €75 billion, which may partly be addressed by further mortgage advances that are securitisable. This figure assumes a fully-funded typical renovation cost of about €17,000 per property, and considers the same eight European RMBS markets mentioned above.
- Electric auto financing: In respect of new battery electric vehicles, securitisable financing could reach €80 billion annually, while there could be a further €30 billion in annual financing required for used ones. These estimates concern only the five major European auto ABS markets, namely France, Germany, Italy, Spain and the U.K.