ESG is evolving to allow investors to engage more systematically with such risks, as well as opportunities arising from emerging regulation that seeks to address them. A key question is the ability to benchmark and compare conventional risk-adjusted returns with those of ESG-compliant investments in the future.
The securities finance industry has not been idly waiting for regulation to arrive, writes Michael Wright, senior manager for securities lending at Nedbank Corporate & Investment Banking in Business Day.
“Through our representation on the Global Alliance of Securities Lending Associations, we have sought to resolve some of the most important issues relating to ESG, and especially governance, ahead of regulatory intervention,” he wrote. “In the process we have created the Global Framework for ESG & Securities Lending, a guide to pension funds for making their securities lending programs more ESG compliant.”
The recent 2024 Securities Finance & Collateral Management Conference witnessed a surge in attendance, with 30% more delegates compared with the previous year. Many of these were international visitors attending for the first time. The level of interest was evident in the exceptional quality of the speakers, as foreign guests also showed a strong appetite to participate in panel discussions rather than simply observing.
The expansion of the conference to include collateral management, securities financing transactions and repurchase agreements demonstrates its commitment to fostering knowledge exchange and collaboration. Encouragingly, regulators, including the Financial Sector Conduct Authority (FSCA), Reserve Bank and South Africa Revenue Service, also actively participated in the conference.
South Africa, as the largest securities lending market in Africa, boasts an average lendable value of R1.3 trillion ($68.6bn), with lender-to-broker loan values reaching R137.6bn. While historically serving domestic needs (because of the regulatory environment, market infrastructure and overall economic landscape), there is now growing demand domestically and internationally for securities financing activities in SA.
“In this era of rapid change and global uncertainty, the SA securities finance industry is well positioned to develop and assert its rightful place in the global arena,” wrote Wright.