ISLA publishes the French version of “Framing securities lending for the era of sustainability”
The International Securities Lending Association (ISLA) has published its white paper titled “Framing securities lending for the era of sustainability” in French.
The white paper comes in preparation for COP26 and to support the upcoming ISLA-led panel session âFinancial Markets of the Future: Framing Securities Lending for the Era of Sustainabilityâ, which takes place in Paris during of the G20 Pension Dialogue of the World Pension Council. & ESG summit on October 28.
Jointly produced by ISLA and the law firm Allen & Overy, the paper examines the role of loans in the transition to a sustainable economy and how ISLA supports this process.
In line with the objectives of the Capital Markets Union (CMU), securities lending helps create a more resilient economy, which in turn will help the EU achieve its goals under the European Green Deal, according to the publication.
The white paper discussed whether the practices in capital markets created excessive short-term pressure on the real economy and suggested, together with the European Securities and Markets Authority (ESMA) and the Federal Reserve Bank of New York, that this was not the case.
He found that short selling does not affect market declines in the long run and that there was no strong evidence to suggest a causal link between securities lending and excessive market pressures to. short term.
In supporting the transition to a sustainable economy, ISLA will lead the working groups on the five-step action plan below, where it will do so;
– Work with industry members and stakeholders to develop a best practice standard on creating a common understanding of ESG objectives
– Work with members to update current best practices for stock recall and to create industry standards around voting in accordance with the principles of good governance
– Adapt current best practices that facilitate transparency vis-Ã -vis regulators regarding the disclosure and identification of shareholders, while respecting the regulatory requirements of SRD II
– Work with industry members and stakeholder groups to undertake a feasibility study on how current market practices could be optimized to increase transparency
– Work with its Collateral Management Steering Group, with a mandate from the ISLA Beneficial Owners Steering Group, to develop high level standards for collateral selection and around the cash reinvestment approach to align with the lender’s ESG objectives
In conclusion, ISLA’s white paper reads: âAt ISLA, we strongly believe that securities lending has an important role to play both in achieving the ESG objectives of market participants and in helping to broader transition of the economy towards Paris-aligned goals and other sustainable goals. ISLA believes the industry can support the growing concerns of asset owners about sustainability and co-evolution, helping them achieve liquidity and growth in these markets. ”