European Securitisation and ESG-Related Issuance: Credit Relevance of Indirect Exposure to ESG Factors

DBRS Morningstar released a commentary on Environmental, Social, & Governance (ESG) and sustainability-related European securitisation transaction issuance with and without second-party opinions (SPOs).
Key highlights from DBRS Morningstar’s commentary include:
• DBRS Morningstar has assessed ESG factors to be credit relevant or significant in various securitisation transactions, where there is a pass-through of ESG considerations from the sovereign or counterparties, in cases when their ratings affect the securitisation ratings.
• European structured finance issuances with SPOs continue to be dominated by green bonds, with social bonds emerging gradually.
• ESG-related securitisation issuance is on the rise again, and we discuss current trends and factors that could influence green or social securitisation bond issuances in Europe. From 2016 to Q2 2023, DBRS Morningstar rated 10 out of 20 structured finance SPO transactions.
• Not all transactions require an ESG label, as demonstrated by the placement of a recent auto asset-backed securities transaction, which was perceived as a green collateral securitisation.