The industry is increasingly factoring climate financial risk and other sustainability risk considerations into collateral selection.
The paper titled ‘Applicability of ESG to Collateral in the Securities Lending Context’ produced jointly by ISLA and Allen & Overy, submits that primary role of collateral as a risk management tool for the market, and amongst other things, how vital it is to ensure adequate diversification of collateral guidelines, as well as any analysis for collateral acceptability to include both sustainability and ESG risks.
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