People have become used to asset managers claiming ESG principles run through their “entire” investment process – and this year shows mounting pressure for that process to extend to securities lending.
The Japanese Government Pension Investment Fund recently decided to pull its securities lending programme out of equities, basing its decision on concern about a lack of transparency regarding the final borrower.
ISLA, the securities lending trade body, had already said ESG would be a key topic for next year, driven by the September 2020 arrival of the Shareholder Rights Directive in Europe. The directive is partly aimed at increasing shareholder engagement and so the question is how investors will engage with companies whose shares they have on loan and if voting on those shares by borrowers may conflict with the lender’s ESG principles.
2020 looks set to be a crunch point for industry challenges. Mainly it is Europe’s Securities Financing Transactions Regulation (SFTR) filling minds. Some say the SFTR may weigh on the securities lending market througout the next decade.
Nick Fitzpatrick, Group Editor, Funds Europe
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