Standards and Recommendations

Collateral and liquidity

In 2019, several beneficial owners and the Sustainable Finance, the Law, Stakeholders (SFLS) Network at Exeter Law School agreed that the “primary purpose of the collateral in securities lending is to mitigate counter-party risk” and that “securities lending collateral parameters, such as exclusion lists, should be considered in ESG strategies”(PSSL 2020). However, that developmental stage included a forecast that clearer and more focussed inclusion of environmental and social matters would form part of collateral later in the future. That was embedded by independent and impartial Global PSSL in the draft principle on collateral in December 2020 and reinforced in the revised Global PSSL in 2021.

Thereafter, following a workstream on interconnected collateral, Global PSSL published a draft forward-looking standard that had a strong components relating to liquidity and transparency.