Read the detailed instrument sheet by clicking on the link below.
Overview
Pooling of financial assets (e.g., loans, receivables) into tradable securities. Enables recycling of capital, increased liquidity, and access to institutional investors.
- Forms: Asset-backed securities (ABS), Mortgage-backed securities (MBS), collateralized Loan obligations (CLOs). Structured through special purpose vehicles (SPVs) that issue securities backed by cash flows.
Risks addressed
Credit risk
Liquidity risk
Applications
| Transportation | Pools low-carbon vehicle loans for municipal or private fleets. |
| Buildings and energy efficiency | Green mortgage securitizations support home retrofits and energy upgrades. |
| Water and wastewater | Aggregates infrastructure loans for access to institutional finance. |
| Renewable energy | Solar and wind loan securitizations unlock liquidity for dispersed small projects. |
Type of instruments and providers
Commercial:
- Brighte Green Trust (Australia): AUD 190m green ABS backed by solar and battery receivables, financing 360,000 tCO₂e savings.
- Sun King (Kenya): USD 156m securitization structured by Citi and Stanbic; raises local-currency debt for 1.4m solar products.
Concessional/public:
- Climate Investment Fund Capital Markets Mechanism (CCMM): USD 500m bond (6x oversubscribed) to fund renewable energy and industrial decarbonization.
- AfDB Room2Run: Synthetic portfolio securitization transferring mezzanine credit risk, freeing AfDB capital for reinvestment in African infrastructure.
- Technical Assistance: IFC, World Bank, AfDB, IDB, ADB, EIB, GCF, CIF, GEF, and donors (FCDO, USAID, KfW, SECO) provide TA, guarantees, and impact frameworks.
Debt sustainability
- Direct: Mobilizes private capital without adding sovereign debt when originated by non-sovereign entities. Contingent liabilities may arise with sovereign guarantees.
- Indirect: Improves sustainability via lower borrowing costs (rating uplift) and off-balance-sheet financing.
Internal capacity requirements
| Minimum | Advanced | Pathway |
| Basic understanding of securitization, SPV setup, debt compliance, and data collection for green loans. | Ability to design SPVs, tranche risks, negotiate investor terms, and issue investor-grade reporting. | Start with donor-supported pilots; co-train with regulators and DFIs; embed advisors to transfer skills. |
Regulatory capacity requirements
| Minimum | Advanced | Pathway |
| Legal authority to recognize securitization transactions and basic green investment qualification process. | Tailored securitization regulation, disclosure standards, and taxonomy for green assets; climate impact monitoring systems. | Use MDB model regulations, launch pilots, and strengthen supervision capacity through TA. |
Pathways to adoption based on financial market readiness
- Shallow: donor first-loss equity, guarantees, and regional pooling.
- Emerging: partial guarantees and aggregation platforms.
- Mature: high-quality impact reporting and scaling resilience-linked ABS.
Pricing considerations
- Pricing depends on asset quality, investor demand, and certification costs.
- Donor equity, guarantees, and FX hedges can reduce spreads and promote issuance.
Average time to deploy
- Commercial green ABS: 6–12 months.
- Donor-supported pilots: 12–18 months (due to structuring and approval processes).
