ISLA and Stech’s Global Principles for Sustainable Securities Lending part ways

The International Securities Lending Association (ISLA), a leading industry trade association representing the common interests of securities lending and financing market participants across EMEA, is pleased to announce important changes to the ISLA Council for Sustainable Finance (ICSF), and the Association’s plans to take the sustainable finance agenda forward.

Broader Environmental Social and Governance topics have been at the forefront of most global industries for some time, with financial services very much focused on key aspects of this important debate. From a securities lending perspective, ISLA has seen a growing interest from market participants, including its members on the implications for areas such as corporate governance, collateral, and short selling, amongst other things.

At the start of 2020, following sixteen months of intensive and rigorous preparations led by committed beneficial owners, ISLA was delighted to launch the ISLA Council for Sustainable Finance (ICSF). ICSF’s broad aims and objectives were to open up consistent debates on the topic, and introduce wide-ranging solutions for sustainable securities lending through the introduction of its Principles for Sustainable Securities Lending (PSSL), an innovative benchmark in sustainable securities lending developed over the past two years by a high-level working group representing beneficial owners, in association with ISLA.

As the year draws to a close, and building on the important foundations and discussions established by the group thus far, ISLA has decided to bring all aspects of Environmental Social and Governance into its well-developedworking group structure. Moving forward, the Council will therefore no longer exist as a separate entity within ISLA, but instead relevant aspects of ESG impacting the wider myriad of ISLA member firms, will be covered by the main ESG working group or relevant groups or subgroups as appropriate. This will lead to efficiencies from a delivery perspective, as the ESG debate moves from a concept and design phase, to one of detailed implementation.

”ICSF raised the importance of integrating and developing ESG in securities lending. This group of beneficial owners opened the door to further contribution and developments of ESG especially in securities lending. I am looking forward to the next steps in ESG integration in the whole securities lending value chain.” Xavier Bouthors, Senior Portfolio Manager, Treasury, Fixed Income Solutions, NN Investment Partners.

“Being part of the original group of committed beneficial owners who initiated ICSF, I am proud that the council has played such an important part of the genesis of the ESG agenda within the securities lending arena.  As our collective efforts evolve into broader and deeper market-wide initiatives, I am proud that it is beneficial owners that have taken the lead on this important topic.” Matthew Chessum, Investment Director, Liquidity Management, Aberdeen Standards Investments.

“As the ESG debate continues to gain momentum, ISLA is committed to the prioritisation of this topic into 2021 and beyond. The work of the Council for Sustainable Finance over the past twelve months to raise global industry awareness of the challenges as well as areas of alignment between ESG and securities lending, has been invaluable. I want to thank each and every individual and firm involved in this initiative, and am excited about how we take much of this work forward for our members across the EMEA region.” Andrew Dyson, CEO, ISLA.

Global PSSL Gains Traction by Embracing Independence

The code that united all ICSF members was co-created by Dr Stech and the working groups he hosted to explore the needs and expectations of the industry during 2018 and 2019. This code was named the Principles for Sustainable Securities Lending (PSSL) and is copyrighted by Dr Stech at the University of Exeter. With funding from the Economic and Social Research Council (ESRC), part of UK Research and Innovation, the ICSF published a pilot version of PSSL in February 2020.

Through Dr Stech’s continued academic work, he concluded that regional limitations and allegiance to a single market were holding PSSL back from attaining its true potential. Thus began the work of re-shaping this concept to a more universal model. This new direction was agreed upon by both ICSF and ISLA and communicated through the ICSF Chair blog available at: https://www.isla.co.uk/blog/icsf-update-7july2020/.

As a product of this exercise, the Global Principles for Sustainable Securities Lending (Global PSSL) was launched in October as an impartial community interest company, independent of any institution or association. This gold standard for sustainable securities lending has been purposefully developed with the flexibility to adapt to the social, regulatory, and cultural requirements of all regions of the world.

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