Green ABS: A New Opportunity

Building a climate-neutral, green, fair and social Europe is one of the four main priorities set out by the European Council in its strategic agenda for 2019-2024 (the EC Agenda). According to the EC Agenda, the success of the green transition "will depend on significant mobilisation of private and public investments, on having an effective circular economy, and an integrated, interconnected and properly functioning European energy market".

The main green initiatives in Europe

Both stakeholder associations and the European Union have introduced various initiatives to facilitate the green transition in the financial markets.

the market conventions adopted over time aimed at enabling access to debt capital markets in order to fund projects with a positive environmental impact (Green Projects). The main market convention is the Green Bond Principles adopted by the International Capital Markets Association (ICMA) and built on best market practices (GBP); the nomination by the European Commission of a technical expert group on sustainable finance (TEG) to assist it in developing, inter alia, an EU classification system (EU taxonomy) to determine whether particular economic activity is environmentally sustainable, and an EU Green Bond Standard (EU GBS)1; and the publication on December 11 2019 by the European Commission of the European Green Deal (EGD) which aims for the EU to become the first climate-neutral bloc in the world by 20502. In order to achieve this, the European Commission envisages, inter alia, the implementation of the Sustainable Europe Investment Plan (SEIP) 3 which will mobilise at least €1 trillion in sustainable investments over the next decade in Europe4. The Securitization market

As regards securitizations, in January 2019 the new regulatory framework for securitizations in the EU5 came into force (the Securitization Framework), setting common standards for all securitizations and defining criteria for "Simple, Transparent and Standardised" securitizations, thus confirming the European regulator's confidence in securitizations as a key tool for the growth and development of the European economy within the capital markets union.

The new Securitization Framework may have an important role6 in developing securitizations aimed at financing Green Projects (Green Securitizations) and convincing investors to invest in environmental projects to achieve the EU's green targets.

To date, however, the demand for asset backed securities...

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