European Green Securitisations Have Found Their Home: The EuGB Regulation

In this commentary, DBRS Morningstar analyses the European Green Bond Regulation and, in particular, the provisions applicable to securitisations labelled as EuGB.

Summary highlights include:
-- A description of the European Green Bond Regulation following its approval by the European Parliament on 5 October 2023 and a description of how DBRS Morningstar assesses ESG factors when rating structured finance transactions.
-- An analysis of the provisions of the European Green Bond Regulation applicable to securitisations.
-- DBRS Morningstar’s outlook on the increase in securitisation transactions issued under the European Green Bond Regulation and labelled as EuGB.

“In recent years, capital market participants have increasingly focused on sustainable finance, although a clear legal framework governing these types of instruments was still missing. The EuGB Regulation is the first legislative act that expressly regulates green securitisations and green bonds. We expect an increase in securitisation transactions labelled as EuGB across Europe since investors can now benefit from a clear framework governing this kind of transaction. Originators that are proactive in implementing sustainable investment-related policies and practices, and disclosing relevant information will be well positioned to take advantage of this new framework,” said Lorenzo Simonte, Assistant Vice President of European NPLs at DBRS Morningstar.