The two deals that have opened the euro securitization market this week present a sharp contrast in how to do ESG disclosure.
Toyota is showing the way, with only its third European deal, Koromo Italy II. Its disclosure is often cited as the gold standard for auto ABS in Europe and unsurprisingly its deal is off to flying start with more than €1bn of demand already.
On debut back in February 2023, it launched the first deal to contain only alternative fuel vehicles, but did not seek any sort of green certification. Rather, it presented investors with clear information on the collateral and considering nearly 98% of the deal was financing for hybrids, which are only slightly greener than pure petrol cars, that was the right approach.
By comparison, Volkswagen, issuer of 43 previous securitizations out of Germany alone, looks like a relative ESG laggard. The prospectus for its deal this week, VCL 44, says environmental impact data is “not available”.
VW also missed its own deadlines for adding ESG data to previous deals, and now seems to take a better late than never approach, updating its last few trades with emissions data after the primary placement.
Its defence, in this case, is that the data from the last deal is a “very good benchmark” this time around.
“There is only a two month time gap between the two pool cuts and the composition of the two portfolios is nearly identical,” a spokesperson said.
VW’s deal attracted one of the biggest books of recent years, topping €2bn at its peak, so it seems that most investors are happy with that justification, or perhaps they are impressed by some of the recent progress VW has made on ESG disclosure.
Anecdotal evidence, however, suggests that many likely just do not care enough about ESG to change their orders.
At the same time, the market is claiming to policy makers that securitization is a key part of financing the green transition. Investors putting their money where their mouth is and demanding more of VW would give their words far more weight.