ESG CLOs: The Opportunities And Challenges

1. Introduction

Environmental, social and governance ("ESG") considerations have taken centre stage in the European debt capital markets this year. We have previously written about this shift towards ESG in the context of ESG bonds and social loans. Arguably, the securitisation markets have been somewhat slower to adapt to this trend. This is quickly changing though, and nowhere is this more apparent than the collateralised loan obligation ("CLO") market.

The European CLO industry has been exceptionally busy in recent months and continues to grow, as evidenced by the number of new entrants to the European CLO market over the last 18 months, with Ireland now being the sole domicile of choice for European CLO issuers. The industry has also been operating in a rapidly evolving legal environment, as market participants have grappled with revised transparency requirements under the Securitisation Regulation, the end of the Brexit transition period and