Environmental factors are most applicable to our securitization analysis of ABS involving vehicles, automobiles, trucking, and agricultural equipment. Our analysis focuses on identifying underlying Parent/Issuer/Sponsor initiatives regarding energy efficiency, environmental impact, and sustainability.
Social factors identified in securitizations of consumer receivables involves the identification of predatory lending risks. This requires an understanding of the Sponsor's (issuer, originator, parent company, etc.) origination and servicing practices. Furthermore, consumer loan and lease products should provide a legitimate benefit for the borrower, as opposed to financial products designed specifically for securitizations. Social factors are also present in ABS of Small Business Administration program loans that promote employment growth through small business development in the United States.
Our analysis of Governance related factors is primarily focused on the alignment of interests between the sponsor, the investor, and the borrower. Securitization programs should benefit a sponsor as part of the ongoing, diversified funding strategy, and not be utilized primarily for the benefit of exploiting securitization markets. As highlighted in the previous section regarding social factors, financial products should have a readily identifiable benefit for the borrower (consumers and small businesses). Finally, governance should also include an analysis of the sponsor's compliance with consumer protection, environmental, and labor laws.