Accountability in voting is in the news, and nowhere more so than on Wall Street. Through their U.S. credit policy association and its Asian counterpart, Bankers have responded to suspicion among critics that problems abound in the murkiness of the proxy voting practices of asset managers for large pensions, mutual funds, and other institutional investors. With the launch of the "Global Framework for ESG and Securities Lending (GFESL)," the partnership by the two industry associations aims to provide a shared decision-making framework for managing ESG considerations in securities lending.
Amidst calls by the Securities and Exchange Commission for more ESG accountability from asset managers, banks, and service providers, a lack of transparency in proxy voting has created reputational risks for investment funds. Meanwhile, the SEC is playing catch-up with its counterparts in other markets. For example, the European Securities & Markets Authority has appealed to the EU Parliament for legislative authority to deter tax cheats from using cross-border securities loans to steal from European treasuries and has already taken steps toward standardizing ESG disclosure and investment practices.
The publication of the GFESL is timely. ESG compliance is the emerging issue the financial industry will be grappling with for the next few years. As investors demand more ESG-focused investment opportunities and regulators around the globe respond with new rules and more vigorous enforcement, investment funds and their managers are under tremendous pressure to make sure their ESG offerings meet expectations.
Regulators and investors are not the only ones pushing financial firms to live up to ESG standards. Fireworks flew at last week's Senate Banking Committee hearings as Senators grilled U.S. banking executives about their stances on and commitments to sustainable finance. The bank executives made clear that they feel the ESG pressure, and have already taken steps to respond, but need clear guidance.
“We make a tremendous amount of disclosures already in ESG, so we’re not against it,” Dimon said. “But you’ve got to be very thoughtful about what it is, what you’re trying to accomplish, and [that]it’s not just done for banks, but . . . for other critical industries in the right way.” 
At the same time, a group of House Democrats turned up the ESG pressure even more by reintroducing two bills that would require retirement plan fiduciaries and investment advisers to consider ESG factors and disclose their ESG policies when making investment decisions. 
A Great Start
The new GFESL framework builds on the RMA's October 2020 study, which revealed a growing recognition amongst the industry that securities lending could be aligned with – and even enable – positive ESG outcomes. However, that same research recognized that aligning securities lending within an ESG investment framework would require greater transparency and more standardized processes. The GFESL is an international effort to set some best practices in five key areas where ESG policies touch on securities lending programs:
- voting rights,
- transparency in the lending chain,
- collateral and cash reinvestment,
- lending over record date, and
- the short side of the market
These are important pressure points for securities lending and ESG. Funding markets will operate more smoothly if lending agents and prime brokers can rely on fairly predictable recalls of loans and collateral over record dates. Greater transparency into the source and destination of borrowed securities will ease tensions with regulators and CIOs alike. However, proof of compliance with voting policies will have to be produced at share level -- not at issue level -- as is today’s standard market practice. It is just too easy to game the system when reporting the number of securities issues being voted by institutional money managers, rather than the count of actual shares voted.
The RMA/PASLA framework is a giant step in bringing together sustainable investing and securities lending. But, more will be needed to satisfy the needs of investors and the demands of regulators.
 https://www.c-span.org/video/?c4965074/user-clip-dimon-esg-disclosure @ 2:11:54
 The Sustainable Investment Policies Act amends the Investment Advisers Act of 1940 and the Retirees Sustainable Investment Policies Act amends the Employee Retirement Income Security Act of 1974 to stipulate that investment advisers and retirement plan fiduciaries, respectively, must establish sustainable investment policies that factor in considerations like corporate governance practices, diversity and inclusion practices, labor and human rights compliance, and environmental risks.