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ESG

ESG investors need to improve securities lending communication

Environmental, social and governance investors can lend out their securities, but greater communication and transparency is needed for it to work.

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While nearly all institutional investors feel confident that ESG investing and securities lending are complementary, there is still a way to go in ensuring that securities lending programmes are fully compatible with ESG principles.

That is the conclusion of a new survey from the Risk Management Association (RMA), involving nine leading institutional investors and 44 firms.

Published in October, it showed that 95% of respondents think that ESG investors are well-placed to lend securities without conflict, yet only 18% are taking the next step to ensure their securities lending programmes align with their ESG values.

Concerns

Securities lending is a good business, generating $8.7 billion of revenues for lenders last year, according to DataLend.

It is, however, riven with perceived conflicts, such as voting rights transferring to the borrower while securities are out on loan, or borrowers using their holdings to advocate short-term interests through short selling.

Securities lending oversight [teams] should try to be more coordinated with ESG colleagues
Fran Garritt, the Risk Management Association
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“Many of those concerns could be alleviated with greater communication within asset managers as well as between asset managers and their lending agents,” says Fran Garritt, the RMA’s director of securities lending and market risk.


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