Year in Review: ESG and European Structured Finance in 2023

In 2023, DBRS Morningstar published 16 commentaries that delve into diverse aspects of ESG factors with respect to European structured finance market and their role in credit analysis. Our research strove to capture sector-specific perspectives (residential mortgage-backed securities, asset-backed securities, corporate mortgage-backed securities, and collateralized loan obligations), providing an understanding of how these factors uniquely influence various sectors and contribute to their credit dynamics (if any).

This commentary serves as a comprehensive examination of our ESG-focused studies related to European securitisation market throughout the year, including
-- DBRS Morningstar’s approach to incorporating ESG in credit ratings;
-- Indirect exposure of DBRS Morningstar-rated structured finance transactions to ESG factors;
-- Navigating ESG dynamics across diverse sectors;
-- Climate-related ESG factors; and
-- Difficulties in data reporting, transparency, and standardisation.

Year 2023 saw a commitment to compliance, swift integration of mandatory disclosure, regulatory scrutiny on greenwashing, and a significant recalibration of ESG considerations towards climate risk. In year 2024, these themes are expected to be broadened and elaborated.