Sustainability regulation for Europe’s green transformation is moving forward. Following a preliminary agreement on the European Green Bond Standard (see TSI kompakt of 10 March 2023), the ESAs and the ECB have now published a joint statement on 13 March 2023. In this statement they encourage the market to collect and report more sustainability data related to the underlying assets of securitisations. This is tantamount to a call for reporting sustainability data on securitisations.
Reasons given by the supervisory authorities
The supervisory authorities justify this step with the fact that securitisations are often based on climate-relevant assets (e.g. real estate mortgages or auto loans). A lack of data would therefore cause issues with regard to an appropriate assessment of the climate-related risks contained in securitisations and in connection with the reporting requirements of the Sustainable Finance Disclosure Regulation (SFDR). The data is also of central importance for the ECB, as the Eurosystem is one of the major investors in European securitisations via the Asset Backed Securities Purchase Programme (ABSPP).
Status quo
The reporting of sustainability data for securitisations is currently only mandatory for the asset classes mentioned above if the respective data is available for the originator. If the IT landscape of an originator does not allow the collection of this data, it currently faces no consequences. Accordingly, ESMA had expanded the disclosure templates to include sustainability aspects on a voluntary basis. In March 2022, ESMA also published a guideline on how ESG standards can be established with regards to securitisations.
EBA report on sustainable securitisation
Extension of reporting requirements expected
The call by the ESAs and the ECB is a clear indication that the reporting requirements for securitisations with regard to sustainability factors will be expanded and made mandatory in the future. The statement consequently refers to the current revision of the ESMA disclosure templates (see also TSI kompakt of 2 March 2023 on current regulatory developments). In addition, the regulatory institutions indicate that comparable reporting requirements are also to be expected for similar financing instruments, such as covered bonds. The supervisory authorities are apparently endeavouring to create a level playing field across all products.
Conclusion
Originators are well advised to adapt their IT landscape and process now at the latest so that they can systematically collect, evaluate and report the sustainability data of securitised assets soon. It becomes increasingly clear that also for securitisations already the near future is green! Let us remain confident that the ECB and the ESAs will stick to the principles of proportionality, efficiency and relevance that they themselves have rightly established.