Fund Solutions

Securities Lending Associations Publish Best Practice Voting Guide

The new guide is the first publication of a new working group formed by five securities lending associations, including ISLA and PASLA.

A new working group formed by five securities lending associations has published a new best practice guide to voting and shareholder engagement.

The working group – to be formally known as the Global Alliance of Securities Lending Associations (GASLA) – was formed in September by the Canadian Securities Lending Association (CASLA), International Securities Lending Authorities (ISLA), Pan Asia Securities Lending Association (PASLA), Risk Management Association (RMA) and the South African Securities Lending Association (SASLA).

The working group was established to facilitate global collaboration in areas such as the integration of ESG factors in securities lending programmes, and to advocate for transparent and regulated short-selling practices and the importance of digital evolution to support efficient, liquid and sustainable capital markets.

GASLA’s first publication – the GASLA Best Practice Voting Guide – aims to assist lenders in aligning their securities lending programmes with broader ESG objectives.

“There should be no conflict between securities lending and a lenders ability to vote,” the guide says, adding that their stewardship policy should consider the interests of the lender, including the materiality of the vote weighed against the incremental securities lending revenue generated by continuing to lend over the voting period.

Lenders should also establish policies on when to recall securities and should communicate this policy to their lending agent, where relevant. Securities lent out are sometimes recalled in advance to ensure the lender is the legal registered holder of record on the voting record date.

The guide says a lender’s decision on whether or not to recall securities for voting should take into consideration a balanced analysis of the overall investment strategy of the firm, and the generation of incremental lending revenue for long term investors.

GASLA will meet virtually on a quarterly basis. One of its first activities entails building a library of ESG resources, curated to reflect the rapid evolution of ESG in securities lending. The resource library will be made available on each association’s website.

The group also plans to work together to develop ESG guidelines and thought leadership in areas such as stewardship, voting rights, collateral, and transparency in the lending chain.

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