Sector developments and company hires

New CLO committee to tackle ‘greenwashing’
The European Leveraged Finance Association (ELFA) has created a new committee to establish industry best practice and serve investors in the CLO market. The CLO Investor Committee will provide a forum for members to identify CLO investors’ requirements, facilitate discussion on general market progress and key issues, and contribute to the regulatory dialogue on the asset class.

One prevalent issue that the committee will prioritise is the development of ESG credentials for managers and deals. Indeed, it says it will work on defining the concept of an ‘ESG CLO’, in order to avoid greenwashing.

By engaging directly with market participants, the CLO Investor Committee hopes to better support and identify further issues and improvements in the marketplace. It will also work closely with other committees within the ELFA, in particular the Loan Investor Committee and ESG Committee.

The CLO Investor Committee will be chaired by Emeric Chenebaux, structured credit analyst at Federated Hermes. A second committee chair will be chosen from nominations taken at the first committee meeting, scheduled to take place on 7 September.

In other news…

Climate risk division formed
International insurance group Howden has launched a new climate risk and resilience division. Led by Charlie Langdale, the team will focus on risk transfer products that help to accelerate and de-risk the move towards a low carbon economy, as well as mitigate the results of climate change.

The team aims to bring together ideas and insight from across the group to create solutions that will have impact in helping its clients in the transition to a more sustainable world. Langdale explains: “We’re helping to remove barriers to financing the projects that will help us move towards a low-carbon economy, while also creating scalable, sustainable markets for funding disaster response by unlocking private capital for social good. We’re driving capital to where it otherwise wouldn’t go and, in doing so, tackling climate risk from both a reduction and recovery angle.”

So far this year, Howden has collaborated with the Danish Red Cross on the first-ever volcano catastrophe bond (SCI 23 March), developed a carbon offset invalidation insurance for the California Cap and Trade scheme and is helping to launch the world’s first fully sustainable insurer, Parhelion.

North America
Capital Four has expanded its US CLO and high yield operations, following the appointment of Ami Dogra, Aasir Khan and Joe Sorensen to its New York office. Dogra joins from Citadel, where she served as senior sector analyst in the credit investment team. Khan recently held the position of investment analyst at Blue Torch Capital, while Sorensen has over 20 years’ experience in the industry and joins Capital Four from MacKay Shield, where he acted as director.

RFC issued on contingent liquidity
APRA has launched a consultation on contingent liquidity for locally-incorporated authorised deposit-taking institutions (ADIs) subject to APS 210 liquidity coverage ratio (LCR) requirements. Based on its analysis and experience of the liquidity impacts through the early stages of Covid-19, APRA considers that it would be prudent for an ADI to maintain surplus self-securitised assets amounting to at least 30% of its LCR net cash outflows. The authority expects the self-securitised assets to be unencumbered and not held as collateral for any other purpose. 

“Given the 2020 experience of volatility in financial markets, it is important that ADIs maintain prudent levels of contingent liquidity reserves for times of stress. Self-securitised assets are a key source of contingent liquidity in stress. By maintaining surplus self-securitised assets at this level, an ADI would be better placed to access material extraordinary liquidity support in a future stress, if required, at short notice,” the authority states.

Feedback on the proposal should be submitted by 20 August. APRA expects to release an updated version of APG 210 with the above amendment, subject to feedback received in the consultation, in late 2021. 

SRT ratings upgraded
KBRA has upgraded its ratings on three tranches and one class of CLNs and affirmed the ratings on one tranche and one class of CLNs issued by Santander’s Motor Securities 2018-1. Since closing, the reference obligations have paid down to a 41.4% pool factor and credit enhancement levels have increased for all rated tranches and CLNs. Additionally, all classes of rated CLNs have continued to receive their timely protection fee payments.