Sector developments and company hires

Cyberattack scenarios weighed
S&P reports that it has seen more credit-relevant cyber events in the last six months than in the previous six years, including the first structured finance transaction reporting an operational disruption following a ransomware attack on the originator and servicer (SCI 28 May). The rating agency says it has explored several hypothetical scenarios to identify areas of potential risk and consider how structural features common in securitisations may help issuers respond to, and recover from, a material cyber event.

“In our view, securitisations have lower direct exposure to cyber events than non-special-purpose entities, such as corporates and financial institutions. However, the potential negative credit impact following a cyberattack could be more pronounced, given the limited resources available to securitisations,” S&P observes.

Many of the structural features already in place to ensure operational continuity in structured finance transactions have positive spill-over effects on cyber readiness. These include cash reserves to address liquidity risks, performance triggers that may change the priority of payments and replacement provisions for key transaction parties that may become materially affected by a cyber event.

Nevertheless, S&P notes that concerns over a key transaction party's level of preparedness for a cyberattack - or demonstrated poor management of an attack - could increase operational risk and potentially result in a ratings cap on the securitisation. “Overall, we believe transaction structures are relatively well prepared to respond to a cyber event and have not taken any rating actions directly attributed to a cyberattack to date. However, failure of the issuer to remedy exposure to a cyber event in a timely manner could lead to negative rating action,” the agency warns.

Environmental disclosure pilot launched
Private market investors with US$2.3trn of assets are, for the first time, requesting standardised environmental disclosures from over 1,000 privately held portfolio companies through non-profit global environmental disclosure platform CDP. The investors include Beach Point Capital, Coller Capital, M&G, Neuberger Berman and Nuveen. The platform will allow them to benchmark private companies and compare like-for-like on environmental performance.

A trend towards the privatisation of high-carbon assets risks diminishing transparency and performance on ESG issues, since private companies do not have to comply with the reporting requirements of a listed entity. To address this gap in transparency, CDP has collaborated with investors to create the first-ever standardised environmental disclosure questionnaire focused specifically on private companies. The Private Markets Pilot’s objective is to increase disclosure from private companies of all sizes, including the mid-markets and SMEs, and those with high-impact business activity that have historically avoided scrutiny on environmental issues and pressure to decarbonise.