The European Supervisory Authorities (EBA, EIOPA and ESMA) published a Consultation Paper seeking input from the financial actors on draft Regulatory Technical Standards (RTS). The draft RTS is specifying the content, methodologies and presentation of information in respect of sustainability indicators in relation to adverse impacts on the climate and other ESG-related adverse impacts of the assets financed by the underlying exposures of simple, transparent and standardised securitisations.

sustainability disclosures for securisations

The SFDR requires manufacturers of financial products and financial advisers to end-investors to consider the principal adverse impacts of investment decisions on sustainability factors, and to disclose how their due diligence policies take those principal adverse impacts into account. However, securitisation is not a “financial product” covered by the rules of the SFDR.

Furthermore, disclosures of the integration of sustainability risks and the consideration of adverse impacts of investment decisions on sustainability factors to investors are insufficiently developed in the area of securitisation. With the adoption of the CMRP, it was, therefore, decided that originators of STS securitisations should also have the option to disclose specific information regarding the consideration of adverse impacts on sustainability factors.

Therefore, to harmonise information disclosure and to ensure consistency between the draft SFDR RTS and these draft RTS, the ESAs were mandated to develop these draft RTS, building as much as possible on their work in the context of SFDR and adapting it, where necessary and relevant, to the specificities of securitisations.

The proposed draft RTS aim to:

  • facilitate disclosure by the originators of the principal adverse impacts of assets financed by STS securitisations on environmental, social and governance-related factors;
  • supplement the single rulebook under the Securitisation Regulation as amended by the Capital Markets Recovery Package (CMRP);
  • draw upon the ESAs’ work in respect of sustainability-related disclosures in the financial services under the Sustainable Finance Disclosure Regulation (SFRD).

The framework focuses on 3 subsections:

  • the means and format of disclosure;
  • the sustainability policies of the originators and the criteria for selection of the assets in the pool; and
  • the selection of principal adverse impact (PAI) indicators to be reported in the annual principal adverse sustainability impacts statement.

The following subsections provide the background for the mandatory and additional indicators for each asset type:

  • New transversal indicator: Non-green asset ratio
  • Indicators relating to residential real estate, and commercial real estate
  • Indicators relating to auto loans and leases
  • Indicators relating to other types of securitisation
  • Indicators relating to exposures to corporates including SMEs as well as trade receivables

Consultation process and next steps

The closing date for responses to the consultation is 2 July 2022. All contributions can be submitted online at www.esma.europa.eu under the heading “Your input – Consultations“.

sustainability disclosures for securisations

Source: ESAs