ICSF chair launches Global Principles for Sustainable Securities Lending
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ICSF chair launches Global Principles for Sustainable Securities Lending 15 October 2020Exeter Reporter: Drew Nicol & Natalie Turner
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The chair of ISLA’s Council for Sustainable Finance (ICSF) Radek Stech has founded an independent entity known as the Global Principles for Sustainable Securities Lending (Global PSSL) which aims to enhance the promotion of environmental, social and governance (ESG) standards across global markets.
Stech — who will act as CEO of Global PSSL alongside his role as the council’s chair — says the new entity will take its original PSSL initiative to a new level by expanding beyond the association’s primary focus of Europe, the Middle East and Africa, to all regions worldwide.
The PSSL represents an effort to ease the adoption of ESG standards in global securities lending markets by offering a voluntary rules framework that will standardise key features of sustainable finance.
Global PSSL will exist as a not-for-profit community interest company that will be independent of the council and the International Securities Lending Association but will work with them to drive forward a sustainable agenda in securities finance.
The trade body endorses the Global PSSL initiative and has collaborated with the new entity to “create a testing ground to enable the principles to grow and mature”.
Elsewhere, Global PSSL has received “significant funding” from the Economic and Social Research Council, part of UK Research and Innovation, through the Sustainable Finance, Law, and Stakeholders Network, which was also founded by Stech via the University of Exeter where he is a senior lecturer.
The new entity’s first task is to construct an enhanced PSSL, also known as the Global PSSL, that is billed for release at the end of the year for consultation and will be open for endorsements from early 2021 to all levels of the securities lending sector.
Stech convened the inaugural roundtable in August, following two years of development and a series of preliminary discussions with prominent beneficial owners, agent lenders and other key market players.
The first progress report based on these meetings details a mutually-agreed roadmap of objectives for the coming months and outlines seven strategic themes on how to improve the current PSSL to better fit with various global markets.
These include: being interconnected and accessible; enabling market continuity; diverse; equitable and inclusive; data-driven; credible and engaging; enabling progress and competition and impactful.
The report explains that the development of these themes has been key in bringing stakeholders together for further discussion.
The areas for improvement also reflect the results of a survey of 56 market participants including beneficial owners, banks, service providers, academics and other stakeholders.
The majority of respondents rated sustainability considerations as ‘very important’ for their organisation, while a further 10 valued them as ‘important’ and seven rating sustainability as ‘somewhat important’.
Many respondents expressed reservations about sustainable securities lending often citing a lack of knowledge, research and understanding of securities lending.
The report explains that this underscores the importance of this project to raise awareness, educate and align with broader sustainable finance.
Market participants also wish to see more focus on the environment, impact and global connections, the survey reveals.
The talks have led Global PSSL to have a dedicated principle on diversity and inclusion while making the principles more balanced in terms of their approach to environmental matters and identifying opportunities for making a financial impact.
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