ESG high on the radar for Bank of England Securities Lending Committee

Minutes of the Bank of England Securities Lending Committee
27 February 2020

Impact of Environmental, Social and Corporate Governance (ESG) on Securities Lending Markets

The Committee discussed the potential challenges and opportunities for the associated with ESG on the securities lending market.

Members agreed that the lack of a homogenous definition for ESG has hampered progress to date, noting that existing attempts by industry (e.g. MSCI’s ESG Ratings approach) had nonetheless proved helpful. Clients continue to ask for ESG compliant structures (including ESG-compliant counterparty selection) but are often less aware of the potential revenue impact associated with doing so.

As expected, ESG is likely to become another metric through which the industry competes. Members agreed that ESG hasn’t yet become a systemic issue but will do so if it is ever applied to e.g. sovereign debt. Some members suggested that the introduction of ESG regulation would ultimately favour larger market participants given the ability to scale up offerings and provide opportunities across business lines.

Finally, the Committee noted that, compared to the US, Europe had made good progress on ESG matters and looks likely to continue with tailored ESG client offerings.

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