PHILADELPHIA
– (October 8, 2020) – A new survey of leading institutional investors released
today by The Risk Management Association (RMA) revealed that 95% of respondents
believe that securities lending activities can coexist with Environmental,
Social, and Governance (ESG) principles.
It
also found that securities lending needs to evolve in order to integrate
investors’ ESG principles with their securities lending programs – and
highlighted the opportunity for the industry to help asset owners better
understand their options for managing ESG factors in securities lending.
The survey was published as part of
“Complementary, Not Conflicting: Securities Lending and ESG Investing Coexist,”
a white paper that is the product of a wide-ranging effort by RMA’s Council on
Securities Lending to capture best practices and identify challenges in
harmonizing ESG goals with securities lending strategies.
“Our research shows that securities lending and
ESG investing can be complementary, not conflicting,” said Fran Garritt, RMA’s
Director of Securities Lending and Global Markets Risk. “This paper shows how
this important balance can be achieved – and is being achieved. It also identifies
the challenges for the securities lending industry in further integrating ESG
factors into securities lending programs. RMA believes that greater
transparency and more standardized processes will benefit everyone who uses the
securities lending market. We will continue to work with all market
participants to ensure the market’s continuing compatibility with ESG
investing, which continues to gain momentum.”
To inform the paper, the Council held detailed
interviews with nine institutional investors and surveyed 44 firms. Respondents
included five of the top 10 global asset managers, two of the top 10 U.S.
retirement plans, and two of the top five global sovereign wealth funds. The
priorities highlighted by the paper include the need for engagement with
portfolio companies as a means of expressing ESG principles, the importance of
proxy voting, questions concerning participation in the short side of the
market, and the benefits of lending to shareholders and other stakeholders.
Key survey findings
- Ninety-five
percent of survey respondents said ESG investing and securities lending can
coexist. But only 18% always apply ESG principles to their securities lending
programs. Another 25% do so on a case-by-case basis, 18% don’t but are planning
to, and 39% simply don’t.
- A lack of timely information about
proxy record dates and voting questions complicates the process of recalling
stock that is on loan. When survey participants were asked to name “measures
that might facilitate the application of ESG principles to their securities
lending program,” 43% said that they want more transparency around proxy record
dates and questions.
- Just 20% of respondents said that
there is “regular” interaction in their institution between those who manage
securities lending and those who manage ESG issues. Another 44% responded that
interaction occurs “from time to time.”
-
Fifty-five percent of participants
ranked “greater education about available options” as the top priority when it
comes to applying ESG principles to their lending program.
“RMA
is making this paper available at a time when ESG is taking on greater
importance in securities lending, which generated $8.66 billion for lenders in
2019 at the same time as serving its customary function of enhancing liquidity,
the availability of collateral, and efficiency in the markets,” said Glenn
Horner, Chair of RMA’s Council on Securities Lending. “With climate change,
Diversity, Equity, and Inclusion efforts, and regulations around data privacy
taking on more significance daily, ESG will only become more integral to every
institution.”
The
paper is available here.
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.
Media Contacts
Frank Devlin, fdevlin@rmahq.org,
215-446-4137
Stephen Krasowski, skrasowski@rmahq.org,
215-446-4095