Wall Street Synthetic Risk Transfer Trade Gets Green Makeover

The European Investment Bank is dangling synthetic risk transfers, a type of securitization winning over Wall Street, to draw banks into more green lending.

The multilateral lender wants to enlist eight commercial banks in a program that will let them shed some of the risks from €11.5 billion euros ($12.5 billion) of loans. It’s offered to put up €800 million through mezzanine tranches referencing those assets, in order to free up loan capacity at the banks.

The banks will then commit twice that amount, €1.6 billion, to green financing, according to Nicolas Mardam-Bey, a Luxembourg-based loan officer at the ...