Winner: Intesa Sanpaolo
Intesa Sanpaolo has won the Innovation of the Year category in SCI’s ESG Securitisation Awards. The Italian lender stood out for its proprietary ESG scoring, which is embedded in important decision-making processes of the bank, including significant risk transfer transactions.
Intesa Sanpaolo’s proprietary ESG scoring methodology is a quantitative and fact-based approach, combining multiple input sources, and covers both corporate and SME borrowers. The scoring leverages direct access to clients to enrich and integrate ESG information. Further features include the use of advanced analytics, such as natural language processing (NLP).
The assessment occurs across more than 100 quantitative KPIs using 20-plus descriptors. For example, environmental factors cover carbon footprint, physical and transition risk, and natural resources and biodiversity. Social factors include human capital development and employee engagement, while governance factors cover board structure and remuneration, business ethics and political engagement, as well as business relationships.
The ESG score can be utilised for various internal processes. First, it enables a better understanding of the client to support them in their ESG objectives and transition.
Second, ESG assessment is integrated to foster responsible credit decisions and it is an assessment that is complementary to credit ratings. Finally, it allows for targeted portfolio selection in risk transfer strategies and portfolio steering activities or new originations.
Regarding portfolio steering, Intesa Sanpaolo’s credit strategies framework aims at steering origination towards the most attractive portfolio clusters through the selection of the best economic sectors and customers in terms of risk-returns, with KPIs including net operating margin, risk weighted asset and cost of risk. The sectoral attractiveness is evaluated by means of prospective trends in terms of ESG features of each sector.
The ESG scoring can also be utilised in risk transfer transactions, by limiting the contribution of part of the portfolio that is less ‘ESG-friendly’, while preserving the overall economic rationale. One case study is a combined €6.5bn cash and synthetic leasing securitisation, where Banca IMI acted as the arranger.
The target portfolio includes loans falling within the internal ESG scoring that incorporates EU taxonomy objectives. Around 70% of the rated portfolio has a ‘not-RED’ ESG score, which is above the thirtieth percentile of Intesa Sanpaolo’s ESG class distribution. At least 40% of the portfolio has an A/B ESG score, which is above the seventieth percentile of the bank’s ESG class distribution.
For full coverage of SCI’s ESG Securitisation Awards, click here.