Sector developments and company hires

Green auto feasibility assessments underway
CO2 emissions data reporting by auto loan lenders is likely to be crucial to classifying auto loan securitisations as ‘sustainable’ or ‘green’, in order to tap demand from ESG-oriented investors, Fitch says. However, the rating agency notes that discussions with lenders imply that creating the basis for detailed CO2 emissions reporting is challenging, as the relevant information is typically stored in different systems from those used by the lender.

For captive lenders, this means the related manufacturer’s systems. For non-captive lenders financing a wide range of car brands, accessing information would be even more cumbersome and will partly depend upon dealers correctly inputting vehicle emissions data at the point of sale.

Nevertheless, some captive lenders have begun feasibility assessments on reporting their asset portfolio’s emissions by connecting their own systems and those of their related manufacturer, often in response to investors requesting ESG-related information, including emissions data. Non-green auto ABS may ultimately see lower investor demand, a factor which Fitch expects will significantly influence auto loan lenders’ efforts to introduce reporting disclosures.

Emissions reporting will be further incentivised by European regulators’ response to the European Commission’s call for advice on disclosure by credit institutions of economic activities that qualify as environmentally sustainable in accordance with the draft EU Taxonomy. To be considered ‘green’, an auto loan needs to come under the category of ‘funding taxonomy relevant sectors’, as set out in the draft EU Taxonomy’s first two defined objectives on climate change mitigation and adaptation.

The Technical Annex by the EU Technical Expert Group on Sustainable Finance, published in March 2020, does not explicitly define the requirements for a green vehicle loan. However, various elements in the report are linked to the EU Clean Vehicle Directive, which provides clear guidance for low- and zero-emission vehicles (LZEV).

Until end-2025, vehicles emitting less than 50g/km CO2 will be considered LZEV, but from 2026 only zero-emission cars will qualify. Fitch expects this to form the basis for the definition of a green auto loan that could be considered in a bank’s green asset ratio.

Furthermore, by November the EBA will draft a proposal for the integration of sustainability aspects into securitisation regulation, which should add clarity on originators’ reporting requirements and other factors for securitisations to be considered sustainable. This could eventually result in favourable capital treatment for sustainable securitisations, although Fitch does not expect this to occur any time soon.

HNWI allocation disclosed
Connection Capital has raised a £3m commitment to allocate to SCIO Capital’s European Secured Credit Fund III. Connection Capital’s high net-worth clients were able to invest in units of £25,000.

North America
Bellwether Asset Management has hired Cara Leonard-Munn as svp, debt asset management. Munn will be responsible for leading the Bellwether debt asset management team, which oversees a wide variety of real estate debt investments, both private loans and public securities. She joins Bellwether from CBRE, where she provided structured finance advisory services.

Lafayette Square has appointed Seren Tahiroglu as cfo of its credit strategy, overseeing the platform’s accounting and financial reporting functions. Tahiroglu has over 14 years of public accounting experience, primarily focused on the financial services industry. He spent the last 10 years at Ernst & Young, where he was most recently a senior manager in the wealth and asset management audit practice, specialising in serving both traded and non-traded BDCs, private equity funds and credit funds.