The European Central Bank today published its opinion on the draft EU Green Bond (EuGB) standard presented by the European Commission in early July 2021 (see article TSI Compact 6 July 2021). In it, the ECB supports the use-of-proceeds approach for securitisations.
The EU Green Bond (EuGB) Standard
As a reminder, the EU Green Bond (EuGB) standard is based on the use-of-proceeds (UoP) approach because it supports the financing of the transformation to sustainability rather than focusing solely on the financing of existing assets.
For securitisations, the important question is whether to follow a formal approach of the draft law. This would have had the consequence that the issuer of ABS securities - i.e. the SPV - would have to observe the UoP approach. However, since the only business activity of the SPV is the purchase of assets, the result would have been an asset approach for securitisations instead of the UoP approach envisaged by the EU Commission.
About look-through to "use-of-proceeds" approach for securitisations
It is therefore extremely positive that the ECB follows a material approach in its opinion and recommends a look-through approach for securitisations. Paragraph 3.1.5 of the opinion recommends focusing on the originator's use of funds (UoP) in particular, in addition to the securitised assets. This is a positive contribution to achieving the European sustainability goals.