The Evolution and Challenges of the ESG Securitisation Market in the UK and EU

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Introduction

In the context of securitisation, the most important considerations in assessing ESG securitisation transactions are how well the nature of the collateral, the use of proceeds and the relevant policies of the parties are underpinned by ESG principles.

To date, the European securitisation market has only had a handful of ESG transactions, predominantly RMBS deals and most of these transactions combined both sustainable collateral and sustainable use of proceeds.

  • While overall financial markets have seen increasing scrutiny and regulations with ESG‑related objectives, the securitisation market is yet to find its footing on regulatory arrangements in relation to ESG financing in both the United Kingdom and the European Union, where market participants rely solely on industry-led initiatives.
  • In the near future, the European and UK regulators do not intend to introduce a substantive regulatory framework for ESG financing in the securitisation market.
  • Against the backdrop of increasing concern for current ESG practices and standards in the wider market globally, this article highlights the evolution of ESG concerns in securitisation from a regulatory perspective.

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The Evolution and Challenges of the ESG Securitisation Market in the UK and EU

23 Nov 2022

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