The rise of environmental, social and governance (“ESG”) financing in Europe in recent years has been nothing short of remarkable as investors increasingly seek to prioritise investment in sustainable assets.[1] This global trend towards sustainable investment has filtered into the European collateralised loan obligations (“Euro CLO”) market with most new issue or reset Euro CLO transactions incorporating ESG investment criteria in some shape or form.
At the same time, regulators are focusing on shifting capital flows towards a more sustainable economy. One way that they have sought to do this is by targeting “greenwashing” of financial products by prescribing and harmonising ESG disclosure in Europe via the Sustainable Finance Disclosure Regulation (“SFDR”),[2] which develops European standards for ESG terminology, investment and reporting. The impact of SFDR on Euro CLOs was a notable theme of 2021, as Euro CLO investors subject to SFDR sought to invest in Euro CLOs subject to certain ESG diligence, investment and disclosure standards (in part to satisfy their own obligations under SFDR or other applicable ESG regimes).
As the impact of ESG investment and regulatory considerations on the Euro CLO market become ever more significant, this Client Alert focuses on how ESG has impacted Euro CLOs and what ESG developments we can expect to see in 2022 and beyond.
Click here to review the full insight: 'ESG and Euro CLOs: The Past, Present and Future'.
