PASLA sets out roadmap for standardising ESG in APAC
21 May 2020 Hong Kong
Image: metamorworks/Shutterstock.com
The Pan-Asia Securities Lending Association (PASLA) is set to launch a consultation as the first step in creating a set of standardised environmental, social and governance (ESG) principles for securities lending specifically for the Asia Pacific (APAC) region.
The association aims to demonstrate the industry鈥檚 commitment to integrating ESG considerations with securities lending, and build on the work of the International Securities Lending Association鈥檚 (ISLA) Council for Sustainable 麻豆影视传媒, which is also crafting a set of Principles for Sustainable Securities Lending.
In its recently-published a , the council called for global consistency in ESG principles, reinforced by enhanced cooperation and communication between industry participants.
The focus on incorporating ESG into securities lending programmes by ISLA, PASLA and others, has in large part been driven by some sustainability-minded beneficial owners questioning whether their dislike of short selling subsequently makes their securities lending programmes incompatible with ESG.
Most notable, Japan鈥檚 Government Pension Investment Fund, the world鈥檚 largest pension fund, its securities lending programme in December 2019 due to concerns around how the assets it was lending were being used.
However, APAC鈥檚 beneficial owners appear to be embracing securities lending as a survey by EY, conducted on PASLA鈥檚 behalf in March, revealed that 89 percent of respondents saw ESG and securities lending as compatible.
The survey questioned 29 industry participants among both PASLA members and other industry participants. Almost 50 percent of respondents were either banks or broker dealers and more than 75 percent are based in APAC.
The survey focused on their perceptions of ESG in the context of securities lending and found that although largely positive, 鈥渕ost respondents also agreed on the need to implement some level of control and accountability throughout the industry鈥檚 value chain to ensure ESG compliance where this is required鈥�.
As a further step in its mission, PASLA says it recognised that ESG is understood differently by different institutions in different regions and that it will 鈥渟tep up its efforts鈥� to engage with APAC asset owners about how the industry can help them achieve controls over securities lending that are consistent with their ESG commitments.
鈥淓SG investment has moved into the mainstream and will continue its momentum,鈥� says Stuart Jones, chairman of PASLA. 鈥淚t鈥檚 vital for the industry to be transparent about how it addresses ESG issues.
鈥淲e want to proactively shape standards to ensure that sustainable investing and securities lending continue to complement each other. It鈥檚 also the industry鈥檚 responsibility to listen to those who have ESG-related concerns about securities lending and explore ways of addressing those.鈥�
Jones notes that despite regional differences, ESG issues typically focus on exercising voting rights in annual general meetings and extraordinary general meeting, ensuring that collateral posted with lenders meets their ESG standards and transparency about who borrows securities and how they use them.
These issues, he says, can be managed through the design of securities lending programmes and the use of technology for monitoring.
鈥淏ut, we need to ensure there are common ESG-related values for participants in the Asian securities lending industry,鈥� he adds. 鈥淔or example, standardised approaches could include a set of templates for ESG variables in securities lending programmes鈥�.
The association aims to demonstrate the industry鈥檚 commitment to integrating ESG considerations with securities lending, and build on the work of the International Securities Lending Association鈥檚 (ISLA) Council for Sustainable 麻豆影视传媒, which is also crafting a set of Principles for Sustainable Securities Lending.
In its recently-published a , the council called for global consistency in ESG principles, reinforced by enhanced cooperation and communication between industry participants.
The focus on incorporating ESG into securities lending programmes by ISLA, PASLA and others, has in large part been driven by some sustainability-minded beneficial owners questioning whether their dislike of short selling subsequently makes their securities lending programmes incompatible with ESG.
Most notable, Japan鈥檚 Government Pension Investment Fund, the world鈥檚 largest pension fund, its securities lending programme in December 2019 due to concerns around how the assets it was lending were being used.
However, APAC鈥檚 beneficial owners appear to be embracing securities lending as a survey by EY, conducted on PASLA鈥檚 behalf in March, revealed that 89 percent of respondents saw ESG and securities lending as compatible.
The survey questioned 29 industry participants among both PASLA members and other industry participants. Almost 50 percent of respondents were either banks or broker dealers and more than 75 percent are based in APAC.
The survey focused on their perceptions of ESG in the context of securities lending and found that although largely positive, 鈥渕ost respondents also agreed on the need to implement some level of control and accountability throughout the industry鈥檚 value chain to ensure ESG compliance where this is required鈥�.
As a further step in its mission, PASLA says it recognised that ESG is understood differently by different institutions in different regions and that it will 鈥渟tep up its efforts鈥� to engage with APAC asset owners about how the industry can help them achieve controls over securities lending that are consistent with their ESG commitments.
鈥淓SG investment has moved into the mainstream and will continue its momentum,鈥� says Stuart Jones, chairman of PASLA. 鈥淚t鈥檚 vital for the industry to be transparent about how it addresses ESG issues.
鈥淲e want to proactively shape standards to ensure that sustainable investing and securities lending continue to complement each other. It鈥檚 also the industry鈥檚 responsibility to listen to those who have ESG-related concerns about securities lending and explore ways of addressing those.鈥�
Jones notes that despite regional differences, ESG issues typically focus on exercising voting rights in annual general meetings and extraordinary general meeting, ensuring that collateral posted with lenders meets their ESG standards and transparency about who borrows securities and how they use them.
These issues, he says, can be managed through the design of securities lending programmes and the use of technology for monitoring.
鈥淏ut, we need to ensure there are common ESG-related values for participants in the Asian securities lending industry,鈥� he adds. 鈥淔or example, standardised approaches could include a set of templates for ESG variables in securities lending programmes鈥�.
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