BNY Mellon has launched a suite of new ESG Data Analytics for collateral management clients.
Through the new platform, market participants will be able to apply their environmental, social and governance (ESG) principles to the assets they are willing to accept as collateral.
International collateral management clients using BNY Mellon's electronic collateral schedule manager, RULE, will now have the opportunity to digitally express their ESG preferences by leveraging ESG ratings and indexes.
Launched in 2019, RULE affords collateral providers and receivers the ability to negotiate collateral schedules, establishing which assets each party is willing to accept as collateral in real time.
The firm's US clients are able to take advantage of these same ESG eligibility capabilities by updating their schedules using the current US methodology.
The functionality draws on MSCI ESG Ratings through BNY Mellon's ESG Data Analytics.
These ratings assign ESG scores to securities under three distinct pillars: an environmental score, a social score and a governance score. These three scores are then adjusted and aggregated into a final ESG letter rating, from AAA to CCC.
The ESG Data Analytics incorporate these MSCI ESG Ratings into clients' collateral eligibility decisions via the schedule manager.
In practice, this means collateral receivers and providers can agree that only securities with a certain ESG rating are acceptable as collateral.
In future updates, BNY Mellon expects to add supplementary ESG data to clients' ability to express their ESG preferences.
BNY Mellon's ESG Data Analytics utilises a combination of crowdsourcing and data science to enable market participants to benchmark their ESG principles against their peers.
The Data Analytics also help clients customise and monitor portfolios in alignment with their sustainability missions, address demonstrability concerns and support evolving standards for ESG implementation practices.
Brian Ruane, CEO of clearance and collateral at BNY Mellon, says: "Rolling out this capability takes RULE, a proven technology that has already transformed the process of negotiating collateral schedules, and expands it into a very crucial and topical area of focus for the industry.
He adds: "Now, through the incorporation of capabilities from ESG Data Analytics, a client can bring their ESG priorities into negotiations around acceptable collateral, adding an entirely new dimension of utility to the platform."
