SCI ESG Securitisation Awards: ESG Issuer of the Year

SCI ESG Securitisation Awards: ESG Issuer of the Year

Thursday 27 April 2023 17:21 London/ 12.21 New York/ 01.21 (+ 1 day) Tokyo

Winner: Obvion

With a well-established but ever-evolving approach, combined with a strategy that not only encompasses new deal issuance but also the advancing of sustainability of all its customers, Obvion is SCI’s ESG Securitisation Issuer of the Year. The firm’s Green STORM RMBS platform began back in 2016 and continues to this day, with the most recent 2023 iteration falling outside the awards period, but yet again successfully pricing at the time of writing.

“We started Green STORM in 2016 because we had substantial funding needs and also saw an opportunity to couple the green assets we had to green investors, as a diversification next to our regular programme,” recalls Sjoerd Humble, manager treasury at Obvion. “We then had the idea to set up a separate securitisation programme in order to be able to do so, targeting specific dark green investors.”

From the outset, Green STORM transactions complied with the ICMA Green Bond Principles, had CBI certification and a second-party opinion from Morningstar Sustainalytics; and they continue to do so. However, Humble notes: “Over time, the collateral that we select has changed a bit because we have to tighten the rules from time to time, as the entire housing stock which is the reference portfolio that you're trying to beat in terms of sustainability also gets greener.”

Indeed, Obvion’s overall strategy has evolved over time as well. The lender has had less of a funding need in the last couple of years but has deliberately chosen to prioritise Green STORM issuance and only issue a regular RMBS if additional funding needs make it necessary. The firm’s chief aim is to maintain its presence in the green RMBS space through the continuation and regular issuance from its programme and, by doing so, maintain its involvement in the green market and be able to contribute to the development of that market.

At the same time, sustainability has become an increasingly important part of the firm’s mortgage business as a whole (see box for more).

That is not to say Obvion’s issuance pattern is an easy one to replicate. “With green deals, collateral availability is always a concern,” explains Humble. “We have a sufficiently large back-book to pick from and do collateral-based transactions, so that’s more straightforward for us. But, for some new entrants to the lending market with smaller portfolios who are starting to use securitisation, it’s more of an issue.”

He continues: “Data availability is often a difficulty too. For us in the Netherlands, there is a register of energy labels that's public that we can use, but in other jurisdictions that's not the case.”

However, Humble is hopeful that the situation will change and open up the market to more issuers. “Once more collateral becomes available and is green and once more data becomes available on greenness – which should happen because asset manager, pension funds and banks need to report, as of 2024, on their holdings and the energy efficiency of their holdings – you could potentially see more securitisations,” he says.

Ultimately though, the goal is for green securitisations to cease to be anything unusual. “You're really issuing green bonds in order to make sure that in the future you can't issue green bonds anymore,” Humble observes. “In the end, we're all planning towards the 2050 Paris Agreement and when we get there, then every portfolio should consist of Label A assets and every investment should be green.”

He concludes: “I think for most investors that are looking specifically for green products, it's also about financing the transition, being part of the transition and playing a role in that transition. Once the transition is over, everything green will be the standard. But, of course, that’s still a long way off.”

For full coverage of SCI’s ESG Securitisation Awards, click here.

Mark Pelham

Sustainable strategy
As noted in the main text, sustainability is a strategic priority for Obvion, which is directly reflected in its mortgage business - whereby it offers its borrowers a range of incentives to invest in energy-saving measures. These include:  

  • Rate discounts: a sustainability-discount on mortgage interest rates (currently 5bp) if the mortgage loan is used to finance an energy-efficient house.
  • Building deposits: borrowers can finance up to 106% of market value, if the part above 100% is used to invest in energy-saving measures. To encourage borrowers to do so, Obvion does not charge these borrowers a higher interest rate if they finance more than 100%.
  • Additional loan: €9,000 to invest in energy-saving measures.
  • Education: Obvion is a member of Sector Collectief DuurzaamWonen, an alliance of mortgage loan originators, intermediaries and educational institutions.
  • Partnerships: Obvion cooperates with partners to make it easier for its borrowers to invest in energy-saving measures.