BNY Mellon Is Providing ESG Data Analytics in Collateral Management

Market participants are currently able to apply their environmental, social, and governance (ESG) principles to the assets they’re willing to “accept as collateral,” utilizing ESG Data Analytics provided by BNY Mellon (NYSE: BK).

As mentioned in the announcement:

“In a milestone development for the collateral industry, international collateral management clients using BNY Mellon’s electronic collateral schedule manager, RULE, now enjoy the capability to digitally express their ESG preferences by leveraging ESG ratings and indexes.”

The company’s US customers are able to take advantage of these same ESG eligibility capabilities by “updating their schedules using the current US methodology,” the update explained.

The functionality draws on MSCI ESG Ratings via 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,” the announcement noted while adding that 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 customers’ collateral eligibility decisions through 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.”

Brian Ruane, CEO of Government Securities Clearing Corp., Clearance & Collateral Management and Credit Services at BNY Mellon, stated:

“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. 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.”

MSCI ESG Ratings represent the first input into BNY Mellon’s ESG collateral management capabilities in what will be “an iterative process of further honing the sophistication of the Data Analytics’ patent-pending ESG mapper,” the update revealed.

In future releases, BNY Mellon “expects to add supplementary ESG data to clients’ ability to express their ESG preferences, making the offering even more responsive to their environmental, social and governance goals.”

Established 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 electronic platform has “transformed a time-intensive, labor-intensive, paper-based negotiation that commonly took weeks to complete, reducing the negotiation period to a matter of hours,” the announcement noted.

BNY Mellon’s ESG Data Analytics assists institutions with achieving their sustainable investment goals by “employing a unique combination of crowdsourcing and data science to enable them to benchmark their ESG principles against their peers.”

The Data Analytics also help clients “customize and monitor portfolios in alignment with their sustainability missions, address demonstrability concerns and support evolving standards for ESG implementation practices,” the announcement added.

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