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Implications of sustainability and ESG for the securitisation market

Tim Conduit and Isabel Tinsley assess the key ESG-related milestones in the securitisation market and more widely. They highlight some key features of ESG-compliant securitisations and share their views on significant future developments.

ESG-focused securitisations have recently moved from being a niche product towards occupying an increasingly mainstream position in the securitisation market. Although ESG-related securitisations were traditionally limited to the green covered bonds market, over the past year several landmark securitisations have brought sustainability to the forefront of the market. This movement within the securitisation context is aligned with the wider global and political commitment towards greater focus on the sustainability of investments and an increased investor interest in human rights considerations.

Policymakers and regulators in the EU, the US and the UK are prioritising sustainability and wider ESG issues and introducing a detailed and complex set of standards and reporting requirements that affect what can be classified as a sustainable finance product.

The landscape is continuing to evolve at pace and at scale. The implications for the securitisation market are significant. Sustainability and ESG are becoming increasingly important issues for securitisation market participants to understand in order to avoid missing out in the transition to sustainable finance.

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