The Drivers for the Focus on Sustainability Understanding why sustainability is emerging as an immediate issue in securitisation is not easy, as there are many related factors. The dominant factors are social conscience and climate change as these have led to changes in attitude and behaviour amongst industry participants; the former because it affects investor demand and the latter because of its impact on risk. The primary drivers are summarised in the table below.
Social conscience
Climate change
Investor demand
Issuer passion
There is a heightened awareness of corporate behaviour globally, particularly in younger generations, which has led to higher expectations of the companies people choose to deal with.
Climate change sceptics have gone the way of dinosaurs and there are plenty of examples of severe climate events leading to financial risks.
Investors are asking a lot more questions about the ESG credentials of the companies they engage with.
Some issuers are satisfying their own social conscience through delivering quantifiably sustainable assets.
Global regulation and goals
Participant motivation
Greenwashing
Impact
Europe is the commonly accepted front runner when it comes to formalising its approach to sustainability and this is directly impacting investor mandates. Global net zero carbon emission targets are also on the radar.
Investor demand, incentives, attractive returns and an underlying belief that opportunities will arise from the focus on sustainability are shaping the market’s interest and response.
There are many shades of 'green' and not all are attractive
Proving the value of a sustainable approach will take time
8 Sustainability in Securitisation
