The European Central Bank today published its opinion on the draft EU Green Bond (EuGB) standard presented by the European Commission in early July 2021 (see article TSI Compact July 6, 2021). In it, the ECB supports the “use-of-proceeds” approach to securitisation.
The EU Green Bond (EuGB) Standard
As a reminder, the EU Green Bond (EuGB) standard is based on the use-of-proceeds (UoP) approach because it supports financing the transformation to sustainability rather than focusing solely on financing existing assets.
For securitisations, the important question is whether to follow a formal approach to the bill. This would have meant that the issuer of ABS securities – i.e. the SPV – would have had to observe the UoP approach. However, since the only business activity of the SPV is the purchase of assets, the result for securitisations would have been an asset approach instead of the UoP approach envisaged by the EU Commission.
About look-through to “use-of-proceeds” approach for securitisations
It is therefore extremely positive that the ECB follows a material approach in its opinion and recommends a look-through in the case of securitisations. Paragraph 3.1.5 of the Opinion recommends focusing in particular on the originator’s use of funds (UoP) in addition to the securitised assets. This is a positive contribution to the achievement of the European sustainability goals.