Abstract

This article provides an overview of environmental, social, and governance (ESG) investment considerations in the context of the broader capital markets, with a focus on structured finance. Perspectives differ on defining an “ESG transaction,” both from an asset class and a market perspective. Various regulatory pronouncements have taken the market a long way in understanding the factors, though more work is to be done. Unique characteristics matter for structured credit investors, as examples herein show, and efforts to expand the use of ESG framing tools have certain inherent limitations, such as data. Greenwashing is a broad market issue to which structured credit financing is not immune. This article also explores examples within the universe of structured products where ESG principles are or can be integrated into an investment framework.

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