ESG Incorporation in Securitised Products: The Challenges Ahead

The Principles for Responsible Investment (‘PRI’) indicate that mortgage-level and property-specific environmental performance data should be incorporated into the underwriting process for banks as well as portfolio files, i.e. green bond frameworks, allocation reports and impact reports for sustainability-labeled residential mortgage securitisation deals. Given the initiatives to incentive environmentally sustainable residential real estate finance take by the European Commission, European Central Bank, European Systemic Risk Board and European Banking Authority, the degree of environmental performance at a property, project and portfolio level takes become increasingly important to efforts to transition to a carbon-neutral economy. PRI is an investor group drawn from institutions in 12 countries and supported by a 70-person group of experts spanning the investment industry, banking sector, and intergovernmental institutions.