Sustainable Securities Lending Principles Receive Backing

Large pension funds among Global PSSL signatories; trade bodies increase collaboration on ESG

The Global Principles for Sustainable Securities Lending (Global PSSL) has published a revised version of its core principles framework, based upon “an exhaustive review process” involving 17 opening signatories.

Global PSSL is intended as a holistic market standard which considers the interests of all institutions and organisations involved in the securities lending market and promotes good governance, transparency and responsible working practices.

The final principles build on a research programme involving beneficial owners launched in 2018 and now incorporates feedback from a wide range of lenders, borrowers, intermediaries, service providers and others.

Opening signatories include UK and Dutch pension funds Nest and PGGM, asset manager NNIP and securities services providers BNP Paribas Securities Services and Standard Chartered.

“I am delighted to welcome these opening signatories who clearly commit to advancing ESG in the whole securities lending value chain through the principle-based approach. It enables market leaders to combine their industry know-how with cutting edge sustainable finance thinking to devise ways in which business can increase success while walking an ethical path,” said Dr Radek Stech, Founder and CEO of the Global PSSL community interest company.

Global PSSL is partly funded by the Economic and Social Research Council, part of UK Research and Innovation, through the Sustainable Finance – Law – Stakeholders (SFLS) Network at Exeter Law School.

It recently launched a consultation on a “forward-looking” standard designed to improve the integration of sustainable investment policies into the selection and management of collateral accepted by asset owners and managers when lending stock.

Open for comment until 15 September, the draft standard aims to facilitate greater transparency and flexibility in pursuit of impact, while maintaining the importance of existing lenders’ priorities such as liquidity and safety.

Trade bodies collaborate on ESG securities lending

Separately, trade bodies representing securities lending market participants across regions have formed a working group to collaborate on common issues, including the development of a global framework for incorporating ESG factors into securities lending programmes.

The decision to create a new group stems from increased collaboration between trade associations over the Global Framework for ESG and Securities Lending, released earlier this year by the Pan Asia Securities Lending Association (PASLA), the Risk Management Association (RMA), with backing from the EMEA-focused International Securities Lending Association (ISLA).

The associations said the framework would provide “standardised options, essential background and key considerations” across six main areas of investment operations, as well as suggestions on best practice.

As well as issues around integration of ESG factors, the group will also work together to advocate the benefits of transparent and regulated short-selling to liquid and sustainable capital markets, and seek “more impactful engagement” with regulators, exchanges and other standard-setting bodies.

The group, which intends to meet quarterly, includes the Canadian Securities Lending Association (CASLA) and the South African Securities Lending Association (SASLA), as well as ISLA, PASLA, and the RMA. Other associations are also welcome, the group said in a statement.

The group will develop ESG guidelines and thought leadership in areas such as stewardship, voting rights, collateral and transparency in the lending chain, while recognising differences in regulation and market practice across geographies. It is also pulling together ESG-related resources and making them available on each association’s website.

“While our respective associations already cooperate productively in service of the industry, coordinating in this way will greatly expand the positive impact of our work regarding ESG, short selling, and other industry global industry priorities,” said Fran Garritt, Director, Securities Lending and Market Risk at RMA.

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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