The Leibniz Institute for Financial Research SAFE (SAFE), European DataWarehouse’s (EDW) partner in the Green Auto Securitisation (GAS) Project, has published a paper entitled “Mutual Funds’ Appetite for Sustainability in European Auto ABS”. This paper is the fourth in a series of publications as part of the GAS project. The three previous papers are listed at the end of this article for reference.¹

The authors explore mutual funds’ appetite for sustainability-related information for European auto ABS and find that mutual (and especially “green”) funds tend to invest somewhat more:

• in the most transparent auto ABS, and
• in Auto ABS with a greater proportion of low-emission vehicles

This suggests that disclosure regarding the environmental impact of the securitised collateral is taken into consideration and implies that issuers of deals with lower emissions should be more proactive in advertising it.
SAFE gathered this information from:

1. auto ABS prospectuses,
2. clues from EDW’s loan-level database together with specific EDW queries,
3. manufacturer sustainability measures.

The authors mention that when the information on vehicles’ fuel type or emissions is not displayed in the prospectus, it can be inferred from the loan-level data. Other sustainability information such as the energy efficiency labels are not often available and when this is the case, they tend not to be comparable across countries and over time. As such, the authors resort to a process of identifying the vehicles and cross-checking the emissions of these vehicles in the European Environmental Agency (EEA) database. This is a work-intensive process that investors cannot generally afford to execute. The findings are consistent when using both the prospectus- and loan-level approach.

After manually reviewing 342 Auto ABS prospectuses, the authors find that one-third include stratification tables by fuel type. This disclosure practice began in 2016, and a steady increase in the proportion of electric vehicles in the pools has been observed since (7% as of 2023). Captive banks were the first to disclose these statistics, followed by non-captive institutions later in 2018.

Overall, the study supports more consistent disclosure of environmental information, suggesting that such information is taken into consideration by mutual funds as part of the investment decisions.

The policy implications from this research project align with the stance of the European Central Bank. In its recent comment paper to ESMA’s consultation on the revision of the underlying disclosure standards for Auto ABS transactions, the ECB advocates the replacement of the Energy Performance Certificates with the gCO2 per km.²

Please get in touch by emailing enquiries@eurodw.eu for any questions related to the GAS Project.

¹See also the paper on Vehicle Identifiers, the Literature Review, and the paper on Fragmented Car Labels
²See ECB Staff response to the ESMA consultation paper on the securitisation disclosure templates under Article 7 of the Securitisation Regulation