Securities finance: Socially responsible lending

Andrew Dyson, CEO of the International Securities Lending Association, explains how ESG is impacting the securities finance agenda for 2021.

As we look towards a post-Covid-19 world, there is no doubt that investors are increasingly demanding different things from their investment portfolios. Much of this change in sentiment is feeding through via the ESG agenda, which is redefining the investment landscape. 

Consequently, themes such as responsible stewardship, including areas like active shareholder engagement and proper social and environmental scrutiny, are now at the leading edge of the investment process. 

Momentum here is set to increase as we look towards the publication of the EU’s revised Renewed Sustainable Finance Strategy in 2021, as well as the shift in position on broader climate change issues that a Biden administration will bring from a US perspective. 

Recognising the very real need to align securities lending with the broad aims of an ESG framework, Isla’s strategy is adapting. 2020 saw the creation of the Isla Council for Sustainable Finance, a semi-autonomous group designed specifically to address these important issues through the lens of the institutional investor. As we move towards 2021 and the agenda gains further momentum, their invaluable work will form one of the building blocks of a wider outreach strategy, advancing from development and concept phases to one of implementation. 

Isla will channel its ESG efforts and focus through a main steering group and subgroup structure, enabling its members to benefit from the full resources of the Association as it works to deliver on its ambitious ESG objectives.

The strategy and deliverables will be built around a new ESG policy framework, of which there will be four key pillars: regulation, advocacy & consultations, best practice, and thought leadership.

The pillars will cover legislation and policy outputs, the developing taxonomy debate, responding to relevant consultations as well as driving Isla’s advocacy efforts through various working groups to respond to these initiatives on a cross-industry basis. As an association, it is vital that Isla develops arguments and dialogue that support the entire securities lending value chain.

In many cases, the development and delivery of best practice and practical recommendations will be the logical outcome of much of our ESG-related work, especially in areas such as taxonomies, collateral screening, short selling, and the often vexed issue of voting. 

Finally, there will be focus on the development and delivery of thought leadership and educational messaging. As part of our wider advocacy efforts, it is important that Isla drives broad and open debates on the pivotal role of securities lending within the capital markets, and how that relates to our desire to align securities lending with ESG metrics.

© 2020 funds europe

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