01/06/20

GUERNSEY: Guernsey Finance launches ESG criteria for private equity.

As published on penews.com, Monday 1 June, 2020.

Guernsey Finance, a joint industry and government initiative established to promote the island’s financial services sector internationally, has launched a set of sustainability criteria for the private equity industry.

The initiative, focused on climate change risks and financial resilience, aims to provide a “pragmatic and proportionate” guide to best practice, the organisation said. The financial services industry has long bemoaned the lack of international standards, saying it was holding back responsible investing.

With the launch of the principles, which are voluntary to implement, the organisation is aiming to standardise the measurement and reporting of environmental, social and governance criteria.

“Time after time our own research has thrown up concerns that sufficiently simple guidance for the private equity industry was lacking. We have developed these pragmatic and proportionate principles in response to that demand,” said Dr Andy Sloan, chair of Guernsey Green Finance, the organisation’s sustainability arm.

The guidance is based on the Task Force on Climate-related Financial Disclosures (TCFD), a framework for corporate disclosure of climate-related risks and opportunities created in 2015. There are two sets of principles, one addressing process, comprised of governance, culture and transparency; and the second focusing on the portfolio, covering risk assessment, assets, taxonomy, measurement, and reporting.

The principles also encourage firms to comply with the UN-backed Principles for Responsible Investment (PRI), currently the most popular guideline among private equity firms.

Due to the impact of the coronavirus pandemic, ESG investing has come into even greater focus in recent weeks.

Tim Hames, former director general of British Private Equity and Venture Capital Association (BVCA), said the buyout industry must be at the forefront of green finance.

Hames, who wrote the foreword of the document, added: “The coronavirus crisis and its consequences have overshadowed everything that we have seen since. The ‘new normal’ will involve deeper and harder questions about where we make products, how we move around, where we work from, how we conduct that work and to what ultimate end that work is a means.”

Private equity funds domiciled or administered in Guernsey have a net asset value of more than £120bn.