Market updates and sector developments

Sustainable Fitch reports that European CLOs – with an average ESG Score of 50.4 - have noticeably higher ESG scores, environmental scores and social scores than North American CLOs, which demonstrate an average ESG Score of 47.9. Governance scores are broadly similar across the two regions, however.

These insights are based on an assessment of 317 European CLOs and 449 North American CLOs, where Sustainable Fitch has ESG Scores available for more than 85% of their notional holdings. Average ESG Scores coverage of the assessed portfolio is 96.4% in Europe and 88.1% in North America.

Regarding the industries that CLOs are exposed to, the firm found that the CLOs with the highest ESG Scores are most exposed to healthcare providers, telecommunications and business services. CLOs with lower ESG Scores are most exposed to utilities, industrial and manufacturing, and broadcasting and media.

However, highest industry exposure does not always influence ESG Scores. European CLOs outperform North American CLOs, even when comparing CLOs with similar highest industry concentrations.

In other news…

SFR partnership inked
Rithm Capital Corp and Pagaya Technologies subsidiary Darwin Homes have formed a new strategic partnership. The agreement will establish Adoor Property Management (APM), a new property management platform for Rithm subsidiary Adoor’s build-to-rent and single-family rental homes. The partnership will also onboard Adoor’s current SFR portfolio onto Darwin’s turnkey, technology management platform.

The aim is to leverage Darwin’s proprietary software and end-to-end real estate platform, establishing the new venture as a leading player in the SFR industry and enabling Rithm to focus on capital allocation and strategic decision-making. Rithm’s investment and asset management capabilities, combined with Darwin’s technology will position the new venture to drive improved operational efficiencies and enhance the resident experience across the portfolio, while supporting Rithm’s long-term growth objectives.

Pagaya acquired Darwin earlier this year, in order to extend its two-sided network product solutions to the real estate market.