DUBAI: Changing regulations and consumer demand driven by environmental, social and governance (ESG) issues means that some structured finance asset classes are riskier than others, according to Moody’s Investors Service.
Aircraft and tobacco asset-backed securities (ABS) as well as project finance and infrastructure collateralized debt obligations (CDOs) have “moderate vulnerability” to environmental risk, while most other asset classes have “low” environmental risk, Moody’s wrote in a report.
Student loan asset-backed securities are the only structured finance sector with “high” social risk, it said.
“Environmental and social risks vary across structured finance asset classes, reflecting the sector’s diverse array of transaction types and assets,” according to Moody’s Vice President Inga Smolyar. “Governance considerations, in contrast, are generally issuer specific.”
Sustainable investing has become a hot topic in Gulf markets over the last year with increased awareness in part springing from the coronavirus pandemic. Demand for ethical and sustainable investments is now on the rise and increasingly being adopted by a wide range of investors from socially aware individuals to family offices and sovereign wealth funds.
The Future Investment Initiative Institute’s “The Neo-Renaissance: Mobilizing ESG for a Sustainable Future” conference takes place online today between 3.30 p.m. and 5.30 p.m. Riyadh time.
Several high profile regional business leaders are due to speak at the event including Saudi Arabia’s Public Investment Fund Governor Yasir Al-Rumayyan who also chairs the institute.