The Association of British Insurers has called for the re-activation of the securitisation markets to help develop environmental investment opportunities.
“We want to work with the government to develop the right kind of environmental investment opportunities, and to respond to the opportunities in the government’s Green Paper on Financing a Private Sector Recovery,” said Alain Dromer, the new chairman of the ABI’s Investment Committee.
Speaking at the ABI Investment Conference in London, he noted the contribution institutional investors can make to economic recovery via “an expanded role for the bond markets”. But the smallest size of bond issue that meets clients’ needs is between £100m and £200m.
“If we are to fund green investment projects effectively, we therefore need to find a way of bundling them together, and of scaling up loans to emerging companies in high growth sectors, to make them attractive to the bond market.“This may mean that, in some form, we re-activate the securitisation markets.”
Dromer argued that securitisation is not “inherently risky and dangerous” despite its perceived role in the financial crisis. “At a time when banks are under renewed regulatory pressure to increase their capital, securitisation can draw in finance from the capital markets,” Dromer added.
Dromer, who is also chief executive of Aviva Investors, said there is an opportunity for the government to work with the financial community to identify what went wrong in the securitisation markets, eliminate those failings, and “re-launch the markets with a regulatory seal of approval, thereby tapping into a potentially rich seam of funding”.
The 300-member ABI represents the UK’s £1.5trn (€1.8trn) insurance, investment and long-term savings industry. Dromer’s speech is available on the ABI web site