Complementary, Not Conflicting: Securities Lending and ESG Investing Coexist

Foreword

Can securities lending and Environmental, Social, and Governance (ESG) principles coexist? Our survey of major global asset owners and managers shows that they can, and this reflects a growing recognition that securities lending can be aligned with – and even enable – positive ESG outcomes.

Of course, as with all important endeavors, differing goals and considerations must be carefully weighed. That is why the Risk Management Association (RMA) has produced this paper, bringing together the questions that institutions need to ask and insight into existing best practices to help investors craft a securities lending strategy that is best suited to their ESG goals and risk appetite. 

The paper addresses short selling, the need for engagement with portfolio companies in order to follow through on ESG principles, the importance of proxy voting, implementation challenges, and other considerations. Although we are living in a time of great uncertainty and change, it is clear that the focus on ESG principles is here to stay. As well as enabling positive environmental and social outcomes, there is also a growing body of evidence that ESG investments can outperform other funds in their categories. 

As climate change, Diversity, Equity, and Inclusion, and data privacy become defining issues for our economy and society, ESG will only become more strategic for every institution. We hope that this paper can help investors everywhere integrate their approaches to ESG and securities lending.

Fran Garritt, Director, Securities Lending &  Global Markets Risk

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