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PASLA and RMA Launch Global Framework for ESG and Securities Lending

27 May 2021

First decision-making framework to provide practical guidance on applying ESG principles to securities lending.  

(Hong Kong/Philadelphia) The Pan Asia Securities Lending Association (PASLA) and Risk Management Association (RMA) today launched the Global Framework for ESG and Securities Lending (GFESL). Presented in partnership by the two industry associations, the GFESL aims to provide a starting point in helping institutional investors apply Environmental, Social and Governance principles to their securities lending programs in alignment with their organizational ESG policies.  

The GFESL provides standardized options, essential background, and key considerations across the six main touchpoints between securities finance and ESG – including voting rights, transparency in the lending chain, and lending over dividend record dates – as well as suggestions on best practice in each case.  

This first edition of the GFESL offers practical and technical guidance to institutional investors or beneficial owners in particular, but subsequent iterations are expected to focus more on the relevance of ESG to other stakeholders in securities lending, such as exchanges and regulators.  

Key best practice recommendations  

Among the best practice recommendations, the GFESL suggests that institutional investors that lend securities should consider:  

  • Voting rights: Assessing or developing a policy for recalling loaned securities based on ESG considerations in their proxy voting framework; identifying the types of shareholder resolutions on which they want to vote by company and by issue.
  • Transparency in the lending chain: Implementing effective minimum standards that reflect their corporate-level sustainability framework; for example, applying an ESG lens to selecting direct counterparties.
  • Collateral and cash reinvestment: Applying the same ESG standards to the non-cash collateral they are prepared to accept when they lend securities as those that they apply to their investment portfolio.
  • Lending over record date: Establishing a clear policy on lending securities over dividend record dates and communicating this with agent lenders; monitoring counterparty exposure in order to identify unusual activity.
  • The short side of the market: Identifying the areas in which they see potential for a conflict between facilitating participation in the short side of the market and their corporate ESG commitments; developing a policy to govern the facilitation of participation in short-selling that includes specific guidance on the circumstances under which they would limit lending or decline to lend.  

Global collaboration  

“Integrating ESG factors into securities lending is increasingly important to all market participants, reflecting the broader shift toward sustainable financial markets,” said Paul Solway, Director and Communications Officer at PASLA. “PASLA and our partners at RMA believe it is essential that the market has a shared understanding of how ESG and securities lending intersect, as well as a common decision-making framework for managing these touchpoints. We are proud to have made a start in this process with this first iteration of the GFSEL and look forward to building on this in future.”  

“Over the last year or so, the industry has established that ESG and securities lending are complementary, not conflicting,” said Fran Garritt, Director of Securities Lending, Market Risk, and Credit Risk at RMA. “The GFESL moves the agenda on to how we actually apply ESG principles in our market, providing valuable technical guidance to beneficial owners in particular. We are proud to collaborate with PASLA on this important step forward for the global securities lending industry. We look forward to working with all industry bodies and stakeholders to refine the GFESL in the future, so that it reflects evolving views about best practice as well as takes into account new research and insights.”

The International Securities Lending Association (ISLA) has also endorsed the GFESL. “We are delighted to see the publication of these ESG guidelines for the investment community from PASLA and RMA,” said Andrew Dyson, CEO at ISLA. “Recognizing that regional variances especially from a regulatory perspective will drive different outcomes, at least in the short term, it is vital that associations lead the way on defining best practice to fully align securities lending within an ESG investment framework across their various regions. We very much look forward to further collaboration and cooperation between our respective members and organizations in and around this important area.”

Extensive market research  

The GFESL is based on extensive market research. In the fourth quarter of last year, PASLA conducted a consultation across Asia Pacific involving 150 senior industry professionals. This consultation was conducted in partnership with AsianInvestor, a leading industry publication, and took the form of an industry survey as well as interviews with selected lenders.  

PASLA’s consultation found that asset owners and managers want to take responsibility for managing ESG factors as they lend out their securities. Survey respondents said that exercising an investor’s right to vote in Annual and Extraordinary General Meetings was the most important ESG factor that related to securities lending, followed by the need to understand the parties involved in borrowing their securities. Eighty-five percent of asset owners and managers surveyed also said some controls should be in place to address concerns over the compatibility of ESG principles with securities lending, with the greatest number of respondents saying that ESG best practice would require restrictions to lending securities in which the beneficial owner has a significant shareholding.  

In October 2020, RMA published a paper on whether securities lending and ESG principles could coexist. The paper included a survey of major global asset owners and managers, in which 95% said they believed ESG investing and securities were compatible, but only 18% said they always applied ESG principles to their securities lending programs, reinforcing the need for a common approach to integration.  

The GFESL also reflects “Action 1” set out in a paper on securities lending and sustainability published by ISLA and Allen & Overy in March of this year. Under this action, “ISLA will work with members and industry stakeholders toward development of a best practice standard on creating a common understanding of ESG objectives in the context of securities lending arrangements.”  

“By putting this research into action via the Framework, we believe that transparency about ESG factors in securities lending can be significantly enhanced,” added Solway. “A clear and widely accepted decision-making framework should enable lenders to better define their approach, align it with corporate-level objectives, communicate it to other participants in the value chain, and monitor its impacts. Ultimately, by facilitating the compatibility of ESG principles with securities lending, the Framework can be instrumental in ensuring the continuing liquidity and efficiency of securities lending markets globally.”              


PASLA/AsianInvestor: ESG and securities lending: Asia charts a course towards alignment, February 2021

RMA: Complementary, not Conflicting: Securities Lending and ESG Investing Coexist, November 2020

ISLA/Allen & Overy: Framing Securities Lending for the Sustainability Era  

PASLA explainer on securities lending:  

About RMA

Founded in 1914, The Risk Management Association is a not-for-profit, member-driven professional association whose sole purpose is to advance the use of sound risk management principles in the financial services industry. RMA promotes an enterprise approach to risk management that focuses on credit risk, market risk, and operational risk. Headquartered in Philadelphia, Pennsylvania, RMA has 1,900 institutional members that include banks of all sizes as well as nonbank financial institutions. They are represented in the Association by 18,500 individuals located throughout North America, Europe, Australia, and Asia-Pacific as of March 31, 2021. To find out more, please visit

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