State Street to launch ESG securities lending collateral investment strategy
19 April 2021 US
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State Street intends to establish an environmental, social, and governance (ESG)-focused commingled cash collateral reinvestment strategy for its agency lending programme.
The agency lending team of State Street Global Markets has partnered with State Street鈥檚 asset management business, Global Advisors (SSGA), to provide pension plan clients with new ESG tools informed by its Global Advisors鈥� R-Factor 鈥� a proprietary scoring system for listed companies.
This tool is used to measure the performance of a company's business operations and governance as it relates to financially material ESG challenges facing the company's industry.
According to SSGA, the R-Factor is 鈥渢he first ESG scoring system that offers companies a roadmap on how to manage and disclose their ESG practices, allowing them to take the action needed to enhance their scores鈥�.
SSGA says the R-Factor addresses the current challenges with data on sustainable financing by removing opaqueness around ESG materiality in the scoring process, by drawing on multiple data sources and leveraging transparent materiality frameworks from the Sustainability Accounting Standards Board 鈥� a non-profit organisation, founded in 2011 to develop sustainability accounting standards 鈥� and corporate governance codes.
State Street Global Markets鈥� global head of client management 鈥� securities finance, Francesco Squillacioti, tells SFT the fund is 鈥減reparing to launch鈥� and he anticipates a late May or early June rollout, 鈥渂ut that is subject to change鈥�.
On whether the underlying clients or State Street鈥檚 traders will use the new ESG-focused cash strategy, Squillacioti says that securities loans 鈥� where the collateral is cash 鈥� generate cash collateral to be reinvested. 鈥淏ased on a participating client鈥檚 securities loan activity, cash will be invested using this strategy,鈥� Squillacioti adds.
Squillacioti also tells SFT that State Street is exploring plans to cover other client types, 鈥渂ut no timetables have been determined鈥�.
The new investment strategy, which will follow short-term investment guidelines to the extent consistent with applicable law, is currently available only to retirement plan clients that participate in State Street鈥檚 agency lending programme, because pension plans are a large and important client base for State Street, Squillacioti says. However, the firm is looking into making this strategy available to other fund types in the future, Squillacioti adds.
Executive vice president and head of global markets at State Street Global Markets Nadine Chakar says: 鈥淭he continued rise in interest in ESG principles across markets underscores client appetite for their securities lending strategies to work in synergy with their ESG strategies. This move builds on State Street鈥檚 commitment to leadership and innovation in applying ESG principles to cash reinvestment for securities lending.鈥�
Senior managing director and global head of cash management at SSGA Pia McCusker says: 鈥淎s a firm, State Street Global Advisors has firmly committed to ESG principles [and] partnering with State Street Global Markets, one of the largest securities lending cash collateral managers in the world, is a natural and logical combination and one that supports institutional investors鈥� ESG goals.鈥�
The agency lending team of State Street Global Markets has partnered with State Street鈥檚 asset management business, Global Advisors (SSGA), to provide pension plan clients with new ESG tools informed by its Global Advisors鈥� R-Factor 鈥� a proprietary scoring system for listed companies.
This tool is used to measure the performance of a company's business operations and governance as it relates to financially material ESG challenges facing the company's industry.
According to SSGA, the R-Factor is 鈥渢he first ESG scoring system that offers companies a roadmap on how to manage and disclose their ESG practices, allowing them to take the action needed to enhance their scores鈥�.
SSGA says the R-Factor addresses the current challenges with data on sustainable financing by removing opaqueness around ESG materiality in the scoring process, by drawing on multiple data sources and leveraging transparent materiality frameworks from the Sustainability Accounting Standards Board 鈥� a non-profit organisation, founded in 2011 to develop sustainability accounting standards 鈥� and corporate governance codes.
State Street Global Markets鈥� global head of client management 鈥� securities finance, Francesco Squillacioti, tells SFT the fund is 鈥減reparing to launch鈥� and he anticipates a late May or early June rollout, 鈥渂ut that is subject to change鈥�.
On whether the underlying clients or State Street鈥檚 traders will use the new ESG-focused cash strategy, Squillacioti says that securities loans 鈥� where the collateral is cash 鈥� generate cash collateral to be reinvested. 鈥淏ased on a participating client鈥檚 securities loan activity, cash will be invested using this strategy,鈥� Squillacioti adds.
Squillacioti also tells SFT that State Street is exploring plans to cover other client types, 鈥渂ut no timetables have been determined鈥�.
The new investment strategy, which will follow short-term investment guidelines to the extent consistent with applicable law, is currently available only to retirement plan clients that participate in State Street鈥檚 agency lending programme, because pension plans are a large and important client base for State Street, Squillacioti says. However, the firm is looking into making this strategy available to other fund types in the future, Squillacioti adds.
Executive vice president and head of global markets at State Street Global Markets Nadine Chakar says: 鈥淭he continued rise in interest in ESG principles across markets underscores client appetite for their securities lending strategies to work in synergy with their ESG strategies. This move builds on State Street鈥檚 commitment to leadership and innovation in applying ESG principles to cash reinvestment for securities lending.鈥�
Senior managing director and global head of cash management at SSGA Pia McCusker says: 鈥淎s a firm, State Street Global Advisors has firmly committed to ESG principles [and] partnering with State Street Global Markets, one of the largest securities lending cash collateral managers in the world, is a natural and logical combination and one that supports institutional investors鈥� ESG goals.鈥�
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