Executive Summary

As part of its continuing series of research studies, Perpetual Corporate Trust (PCT) and the Australian Securitisation Forum (ASF) have collaborated to undertake a comprehensive study of the views and expectations of market participants with respect to the themes of sustainability and Environmental, Social, and Governance (ESG) in the securitisation market and transactions.

Securitisation continues to have an important role to play in bringing competition to consumer finance lending markets and augmenting the financing of economic activity. New primary market issuance in 2021 has been exceptionally strong, with a large number of diverse issuers and transactions being brought to market in Australia and New Zealand, including inaugural issues.

The study

For a number of years, there has been a rapid acceleration of interest in sustainability within financial markets. Sustainability has been a trending topic in a number of investment markets and jurisdictions, particularly in the European Union. Perpetual and many Australian companies are increasing their focus on sustainability and now produce annual sustainability reports*, while investment managers are increasing their focus on sustainability for their investment decisions.

We also see regulators adding sustainability into regulatory frameworks. As an example, the Australian Prudential Regulation Authority (APRA) recently released a Draft Prudential Practice Guide CPG229 Climate Change Financial Risks (CPG 229) which reflects the established framework for considering and managing climate risks developed by the Financial Stability Boards Task Force on Climate-related Financial Disclosures (TCFD). In September 2021, APRA also published an information paper on the Climate Vulnerability Assessment (CVA), focusing on the transition and physical climate risks arising in Australia that directly impact Australian lending. APRA has flagged that regulated banks will be required to assess residential mortgages and corporate and business lending exposures, which account for approximately three-quarters of their Australian lending exposure. As part of our 2021 study, we spoke to a wide range of securitisation industry participants about the topic of sustainability, how it relates to ESG and the factors driving market interest. Innovation has long been a hallmark of the securitisation industry and this study seeks to illuminate the trends and expectations of the securitisation market with regards to sustainability, and what it may mean for the future.

Perpetual Corporate Trust and the ASF thank the author, Gary Lembit, Senior Manager, Strategy and Business Insights at Perpetual, and all the industry participants who made this report possible. Their time, candid opinions and views are greatly appreciated and lend this report both rigour and insight. Their responses have been relayed liberally throughout the report whilst maintaining their anonymity. We hope you enjoy the illuminating insights this report provides.

Richard McCarthy

Group Executive Perpetual Corporate Trust

Chris Dalton

Chief Executive Officer Australian Securitisation Forum