State Street Corporation has unveiled a strategy that applies environmental, social and governance (ESG) principles to cash reinvestment for securities lending. A joint undertaking of State Street Global Markets’ agency lending team and State Street Global Advisors, the group’s asset management business, the ESG securities lending commingled cash collateral reinvestment strategy follows short-term investment guidelines while incorporating R-Factor, a proprietary ESG scoring system, into investment decision-making.

“The 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,” says Nadine Chakar, executive vice president and head of global markets at State Street Global Markets. “This move builds on State Street’s commitment to leadership and innovation in applying ESG principles to cash reinvestment for securities lending.”

The strategy is currently available only to retirement plan clients that participate in State Street’s agency lending programme, and not otherwise available to the public.

“The groundswell of ESG support among the institutional lender and beneficial owner community in recent years has given rise to a multiplicity of related products, but the product category for ESG-aware, commingled cash reinvestment funds remains untapped,” says Francesco Squillacioti, global head of client management, securities finance, at State Street Global Markets.

“This launch affords State Street’s institutional client base yet another opportunity to express their focus on ESG and reaffirm their attention to socially responsible yet prudent investing through a securities lending programme.”