Since the launch of Guernsey Green Finance four years ago, quickly followed by the world’s first regulated Green Fund regime, Guernsey has proved that it is worthy of its excellent reputation in the global sustainable finance community.
And far from resting on its laurels, the island’s specialist financial services industry has continued to develop products that propel capital towards sustainable initiatives. We are not simply talking the talk, we have the credentials to back it up. The island’s financial services regulator, the Guernsey Financial Services Commission, has just launched a consultation into a Natural Capital fund regime and is also consulting on how to further strengthen anti-greenwashing measures. But more on that later.
It’s not just the funds industry that is working so hard to develop products. The Guernsey International Insurance Association (GIIA) has developed a world-leading insurance ESG framework[i], and the island’s pension industry is working with GIIA and Guernsey Finance to follow suit later this year, based on UN principles. These developments are recognised by leading international organisations such as the United Nations Financial Centres For Sustainability (FC4S), of which Guernsey is a proud member, while the island’s regulator, the Guernsey Financial Services Commission (GFSC), is part of the Sustainable Insurance Forum, the Network for Greening the Financial System and recently had its membership application accepted for the Taskforce on Nature-related Financial Disclosures Forum.
More recently, Guernsey also joined the USA, Germany, UK, France and other major economies to become one of few jurisdictions globally to report its position with regards to the UN Environment Programme’s Fiduciary Duty in the 21st Century initiative.
My appointment, more specifically the idea of having a member of government in the position, as Chair came as a result of Guernsey Green Finance’s 2022 strategy, the development of which was informed by FC4S’ fourth annual State of Play report. ‘Leading Financial Centres Stepping Up Sustainability Action’ was the outcome of FC4S’ annual assessment programme.
WE ARE GUERNSEY, and by extension Guernsey Green Finance, contributed funding to the report, which identified several key areas where more focus is needed to underpin progress around the sustainable finance agenda.
Over the three years Guernsey Finance has been participating in the survey, it has been useful for Guernsey to see the positive progress we are making year on year. We are pleased to have seen an improvement in the depth and breadth of the survey, and in Guernsey's performance as a sustainable finance centre.
The assessment programme helped us to address and prioritise the areas in which we still have room to grow and improve. It has illustrated to us the need to further coordinate our finance sector and our government to make changes, both as an island and an international finance centre.
The programme has provided a useful sense check of the global position and development of green and sustainable finance, and our place within it. Even for those who weren’t collecting the data and were unable to complete the survey, the assessment programme provided a gap analysis of the data they are missing and may wish to collect.
The process has also helped us see the global difficulties that exist around data collection and education. Identifying this has helped us collaborate more with other members to share best practices and how we can improve. To give an example, we have spoken to Luxembourg and Hong Kong on the development of their educational programmes. Collaboration is key to solving the climate crisis. Without the programme, we would have no opportunity to share our knowledge with other finance centres and learn from them.
Guernsey Finance was able to share the findings of previous assessment programmes with policymakers and regulators in Guernsey. This has bolstered discussions which has led to the identification of areas where we could make changes and improve our own areas of policy and regulation. For example, in the summer of 2021 there was an update to the Guernsey Code of Corporate Governance, which asks boards to consider the impact of climate change on their strategy and risk profile.
The agency was able to present the findings of the Guernsey-specific report to our highest level of government, which garnered further support for our green and sustainable finance initiatives.
GIIA said in the foreword of its ESG Framework: "The UN Sustainable Development Goals are placed centrally within this ESG framework for insurers and governance requirements follow UN principles." We see this as a clear indication of the value and importance of both the UN SDGs and the UN FC4S assessment programme. Our insurance sector in Guernsey is looking at ways to improve its methods of data collection following the survey last year.
In September, Dunant Re IC Limited became the first insurance entity to be accredited and receive a kitemark under the Guernsey International Insurance Association (GIIA) Environmental, Social and Governance (ESG) Framework.
Demonstrating another world first that strengthens Guernsey’s global reputation in this sector, the GFSC has published two consultation papers proposing the introduction of what could be the world’s first Natural Capital Fund regime accompanied by further guidance to guard against greenwashing.
Once introduced, the regime will build on the success of Guernsey’s world-leading position in sustainable finance by creating a fund regime to help channel investment into biodiversity and natural capital projects.
The first Consultation Paper proposes the creation of a Natural Capital Fund kitemark designation that is committed to making nature positive investments. It will complement the Bailiwick’s existing regulated Guernsey Green Fund regime, which contains funds that are committed to carbon mitigation and now channels nearly £5 billion into green investments.
The second Consultation Paper seeks to enhance levels of confidence in the Bailiwick’s sustainability framework by introducing measures that help mitigate the potential risk of greenwashing.
Together the Guernsey Green Fund and Natural Capital Fund are designed to provide Guernsey funds with a choice of complementary sustainability designations, based on international standards.
This marks another instance in which the GFSC has acted proactively and shown leadership in this space.
I am very excited about Guernsey’s 2022 Sustainable Finance Week in September, the first since I became Chairman. The event is getting bigger and better every year. After Covid-19 restrictions resulted in the first year, 2020, moving entirely online, and then a mixture of online and physical sessions last year, the entire week of keynote speeches and panel discussions will take place on-island this year, with plenty of other activities to supplement what I’m sure will be fascinating content.
The three key themes, already highlighted elsewhere in this report, are biodiversity, the energy transition, and carbon markets and pricing. These are the same themes as those set out in Guernsey Green Finance’s Strategy Report, which was released earlier this year.
The strategy sets out its measures and core areas of focus with a view to Guernsey maintaining its position as a leading sustainable finance centre, informed by extensive research and stakeholder engagement.
The report was developed with the support of Guernsey Green Finance’s industry-driven strategy group, FC4S, collaboration with key stakeholders across Guernsey and internationally, and discussions at COP26, at which Guernsey Green Finance was present.
It outlines how engaging with these key themes will promote and communicate Guernsey’s sustainable finance priorities and capabilities. The purpose of the strategy is to build on Guernsey’s achievements in the sector so far and demonstrate its position as a leading green financial services provider, an innovator of new products and services, and a supporter through professional services offered to the green sector. You can read the full report here.
There remains much to be done to win the fight against climate change and the damage being caused to the environment. Guernsey is no exception and still has a lot that it can do, but we believe the island is ahead of the curve, having displayed leadership through the development of new and innovative solutions. However, it would not be possible without HNWIs and their willingness to channel capital into solving these issues.
Guernsey remains a force for global good.
Deputy Nick Moakes
Deputy Nick Moakes is a Member of the States of Guernsey Committee for Economic Development. Guernsey Green Finance is the initiative through which Guernsey Finance delivers on Guernsey's strategic commitment to sustainable finance. Learn more at https://www.weareguernsey.com/finance-industry/thematics/sustainable-finance/.