The Feasibility Of Securitization In Greening Bank Financial Statements

Abstract

Despite strong projections of imminent rising temperatures in the 21st century, a small fraction of banking assets flows towards green financing. The study aims to establish the feasibility of greening bank statements using the securitization technique. A document analysis was carried out on banks' statements of financial position. A purposive sampling of the top 40 banks by assets is employed. Commitments by the 40 largest banks by assets were obtained from their annual reports. The European securitization forum website provides the securitization issuance data. A green coverage model was formulated to determine the amount of climate-linked assets covered by the green commitments. A gap in coverage with a maximum of 40% was established. Regression analysis of the relationship between asset sizes and green financing commitments displayed a weak, nonetheless positive link between the variables. The null hypothesis stipulating no relationship between the variables was tested and rejected. The data supported the hypothesis that the value of securitization issuances is inadequate to green the financial statements. However, the feasibility of banks achieving green financing targets by increasing green finance coverage or current commitments with a disproportionate increase in brown-backed securitized assets was evident.