Box 3

Securitization

Securitization can be described as repackaging of multiple individual assets that are too small or risky to attract investors if sold one by one.  The assets, such as mortgages, are bundled as bonds or other financial instruments for resale in the secondary market.  Some observers see the trend toward increased securitization as an important opportunity to group small, environmentally friendly investments (such as those in biodiversity business) in ways that are more likely to attract financing from international capital markets.  Others are concerned that securitization severs the direct link between investors and enterprises, rendering asset holders less likely to know or care about the environmental and social impacts of their investments.

Source: Ganzi et al., 1998