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ESG Approaches in Securitization Transactions

Author

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  • Natalya A. Khutorova

    (RANEPA, Moscow, Russian Federation)

Abstract

The spread of the sustainable development concept has given rise to sustainable finance, as well as the infrastructure of the financial and consulting industry of valuations, verifications and various databases in the field of ESG. This research is devoted to theoretical and practical study of the accumulated experience of ESG securitization transactions in order to systematize ESG financing instruments and directions of development of this sphere in modern conditions. The study showes that ESG securitization practices are being integrated into capital management processes in line with sustainable development goals, with the most developed centers in the USA, Europe and China. The study systematizes the main types of ESG securitized assets, gives their characteristics and identifies current trends. In Russia, despite its isolation from the world financial markets, the practice of ESG securitization is developing, covering new directions. The study notes the potential for the development of green mortgages, which will contribute to the activation of securitization transactions in the segment of residential and commercial real estate. High potential for development of the social segment of ESG securitization is also noted due to the growing demand for financing social projects in the regions. Expansion of the practice of social mortgage securitization will contribute to the redistribution of risks between the public and private sectors, while active involvement of Russian banks in a variety of ESG lending programs (car loans, lending to small and medium-sized businesses with a green and social focus, e.g. for the construction of social infrastructure, etc.) will expand the market. There is a suggestion that the development of digital ESG securitization platforms will help expand the reach of retail investors, while cooling the junk bond market. The article notes that the expansion of multi-tranche ESG securitization will allow long-term assets of pension funds and various ESG funds to be leveraged into mortgage-backed securities. Overall, ESG securitization improves the structure of transactions, expands the range of derivatives used, improves the quality of credit and interest rate risk management, and contributes to the achievement of sustainable development goals.

Suggested Citation

  • Natalya A. Khutorova, 2024. "ESG Approaches in Securitization Transactions," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 2, pages 72-87, April.
    • Handle: RePEc:fru:finjrn:240205:p:72-87
    DOI: 10.31107/2075-1990-2024-2-72-87
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    References listed on IDEAS

    as
    1. Shanuka Senarath, 2017. "Securitisation and the global financial crisis: can risk retention prevent another crisis?," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 18(2), pages 153-166.
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    3. Acharya, Viral V. & Schnabl, Philipp & Suarez, Gustavo, 2013. "Securitization without risk transfer," Journal of Financial Economics, Elsevier, vol. 107(3), pages 515-536.
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    More about this item

    Keywords

    sustainable development; ESG securitization; mortgage-backed securities;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • P11 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Planning, Coordination, and Reform
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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