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April 27, 2022
Cadwalader Capital Markets partners Nick Shiren and Claire Puddicombe participated on panels at the 9th annual Investors’ Conference on European CLOs and Leveraged Loans last week in London.
Shiren moderated the panel, "The Wild West: Legal & Regulatory Roundup," which addressed a range of timely topics, including the uncertainties around the transparency requirements, the post-Brexit possibility for regulatory divergence and the recent HMT review of the Securitisation Regulation in the UK.
The panelists commended HMT’s recommendation that further work be done to provide more flexibility to the format and content of the reporting templates. The panel also considered that extending the STS framework to CLOs might assist in attracting additional investors to the CLO market.
Puddicombe’s panel, "ESG Considerations: Moving from ‘Sustainable’ to ‘Conscious’ CLOs", broadly addressed updates on and reactions to the Sustainable Finance Disclosure Regulation (SFDR) and associated issues and concerns.
For one, the panelists acknowledged that reporting under the SFDR is subject to challenges and the availability of data is key to making progress.
Puddicombe noted, for a securitisation to be considered “sustainable,” there is currently no market consensus nor regulatory provision that covers the relevant aspects when evaluating the weighting or the minimum amount of sustainable collateral or sustainable use of proceeds that are required.
And while a “conscious” CLO appears to be one that takes positive steps toward adjusting the ESG impact of its underlying assets, the required extent of such intervention is open to interpretation, she said.
“The European Banking Authority (EBA) has confirmed that financial instruments issued within securitisation transactions are not ‘financial products’ for the purposes of the SFDR and so cannot technically be Article 8 products,” Puddicombe said. “Yet this doesn’t preclude managers from marketing Article 8-‘aligned’ CLOs, which are managed in line with the objectives of Article 8.”