European Securitisation and ESG-Related Issuance: Second Party Opinions versus Credit Relevance

DBRS Morningstar released a commentary on Environmental, Social, & Governance (ESG)-related European securitisation transaction issuance with and without second party opinions (SPOs). ESG-related issuance is on the rise and we discuss current trends and factors that could influence the green or social securitisation bond issuances in Europe. We also delve into details of DBRS Morningstar-rated transactions where ESG factors have been relevant or significant in the credit analysis but did not carry any SPOs.

Key highlights from DBRS Morningstar’s commentary include:
-- European structured finance issuances with SPOs have been dominated by green bonds with social bonds emerging gradually.
-- To our knowledge, there have been 17 European securitisation transactions that also carried second party opinions.
-- The recent upward trend of ESG-related issuance in structured finance is likely to continue in the future, further boosting the ESG-related SPO securitisation market.
-- In our view, ESG considerations can be credit positive or credit negative, but are often credit neutral.

“Recently, the European securitisation market has seen a number of securitisation bond issuances carrying green or social bond labels. RMBS has been the dominant asset class in ESG-related securitisation transactions in Europe but we do see ESG factors gaining traction in other structured finance asset classes too, namely CMBS and Consumer ABS,” said Mudasar Chaudhry, Head of European Structured Finance Research at DBRS Morningstar.