ESG investors must improve communication on securities lending
While almost all institutional investors are convinced that ESG investing and securities lending are complementary, there is still some way to go to ensure that securities lending programs are fully compatible with ESG principles.
This is the conclusion of a new investigation by the Risk Management Association (RMA), involving nine large institutional investors and 44 companies.
Released in October, it showed that 95% of respondents believe ESG investors are in a good position to lend conflict-free securities, but only 18% take the next step to ensure their securities lending programs are successful. ‘align with their ESG values.
Securities lending is big business, generating $ 8.7 billion in revenue for lenders last year, according to DataLend.
However, it is fraught with perceived conflicts, such as the transfer of voting rights to the borrower while the securities are on loan, or borrowers using their assets to defend short-term interests through short sale.
Supervision of securities lending [teams] should try to be more coordinated with ESG colleagues
Fran Garritt, The Risk Management Association
“Many of these concerns could be alleviated through better communication within asset managers as well as between asset managers and their loan officers,” says Fran Garritt, director of securities lending and market risk to RMA.