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ESG/sustainable finance in securities lending
Journal of Financial Compliance,
5
(4),
359-369
(2022)
Abstract
Today, more and more investment strategies are not only led by profit considerations but, also by the incorporation of environmental, social and governance factors and their effect on our planet and society. Sustainable investment strategies are not only limited to the relationship between client advisers and investors but also need to be considered in other business areas, such as lending/borrowing and securitisation/collateralisation. Achieving an effective incorporation of sustainability risks and opportunities to the regulatory framework requires collaboration between global and national policy makers, regulatory and industry bodies. This paper provides the current status regarding global developments — geographically, regulatory and industry driven — in incorporating ESG factors to the securities lending business/process, the current holistic regulatory environment and the current data requirements and challenges, together with suggested guidance for compliance personnel. As a final remark, all financial initiatives and regulations require data — key factors are generation, collection, enrichment, processing and distribution in a timely manner and of top quality — not only as part of the investor's advisory process, but also when it comes to the integration of ESG into the securities lending process.
Keywords: ESG standards; securities lending and borrowing; data coverage and quality; sanctions; collateralisation; KYL; KYB; KYC
The full article is available to subscribers to the journal.
Author's Biography
Heiko Stuber is Senior Product Manager for Reference Data at SIX, Business Unit Financial Information and has been with the company since 2012. In his role, he is responsible for identifying market trends and customer requirements in the regulation area and to define solutions that mitigate clients' risks — such as for CSDR, MiFID II, SFTR, AIFMD, Hong Kong SFC Suitability etc. On a regular basis, he participates as a regulatory expert in industry working groups initiated eg by ECSDA, PIMFA and as a speaker at industry events such as PostTrade 360°. Previous to joining SIX, Heiko Stuber gained extensive global experience within the investment banking area as principal consultant and project manager for international banks, commodity trading companies and utility providers. Additionally, he also led the analysis of the whole trading life cycle covering front, middle and back-office processes, data flows and systems for listed instruments and OTC derivatives, and has managed projects within the energy and commodity trading area.
Jacob Gertel is Senior Content Manager for Legal & Compliance Data at SIX, Business Unit Financial Information. In this role, he is responsible for the analysis and implementation of data and products in the areas of tax, regulation and compliance, such as FATCA, Section 871(m), Financial Transaction Tax (FTT), MiFID II, FinSA, ESG, Securities Landing etc. Before joining the company in 2011, Jacob Gertel headed the compliance department and acted as Compliance Manager at various international banks in Switzerland. His responsibilities included being involved in writing the firm's regulatory policies, introduction and implementation of compliance related directives and procedures, monitoring and reporting requirements, being involved in the account opening process, AML monitoring and the implementation of all other regulatory requirements, including the area of investor protection. Furthermore, he also was responsible for staff training in the area of compliance and regulations, the implementation of compliance related IT tools and the complaint process.
