A first analysis on the green securitizations in Italy

Abstract

This paper represents one of the first empirical analyses of the market for green securitizations in Italy. Green securitizations are financial instruments for which there are currently no universally accepted definitions or standard methodologies to identify them. We thus discuss possible definitions and limitations in identifying these instruments. To overcome practical constraints, we argue that, for the time being, a feasible way is to label a securitization as ‘green’ based on the assessment of the sustainability of the economic activity of the borrower of the underlying securitized loans. We also describe the main characteristics of the market for green securitizations originated by banks in Italy during the decade 2010–19. Empirical and econometric analysis show that banks’ securitized loans to ‘brown’ (less sustainable) economic activities grew much more rapidly than those to ‘green’ ones suggesting that banks preferred to keep loans to ‘green’ activities in their balance sheets and to derecognize loans to ‘brown’ ones. Finally, we show that the usual indexes of carbon content of Italian banks’ loans overestimate the amount of financed emissions if they do not take banks’ securitizations into account.