It is difficult to ignore the issue of climate change today. Climate finance the issue of how the global population will make the changes required to limit global warning and give the planet a sustainable future tends to be a step away from the Extinction Rebellion protests taking place in London. However, climate finance is a significant issue for Guernsey.
While it was some time ago that Guernsey made a strategic commitment to climate finance, it is only in recent years we have seen that lead to the development of bespoke green financial products. Last year we developed the Guernsey Green Fund regime – a world first regulatory regime for green investment funds.
Guernsey is playing a full part in the drive to deliver a more sustainable future, at the forefront of the global finance movement on climate change.
Guernsey Green Finance is a member of the United Nations’ Financial Centres for Sustainability, part of the UN Environment Programme, a network of more than 30 global financial centres, including Paris, London, Tokyo, and Beijing, which is working to meet the investment goal of nearly $90tn globally for green and sustainable infrastructure by 2030 and Guernsey, through its regulator the Guernsey Financial Services Commission, is also a member of the Network for Greening the Financial System.
Guernsey rates well against the UN EP framework, making good progress on delivering its own plan as part of the global network, but frankly much more needs to be done to start to make significant progress to deliver against the UN IPCC targets.
Our flagship at present is the Guernsey Green Fund, available to any Guernsey-domiciled fund structure which has the objective of a net positive environmental outcome, with at least 75% of investments falling within the development banks’ list. For non-Guernsey funds and other instruments, TISE GREEN is a dedicated segment of the Guernsey’s international securities exchange.
It has been designed to provide certainty and clarity regarding investment parameters, and could allow for accurate benchmarking in the sector once take up reaches a tipping point. As a leading funds domicile, with particular expertise in private equity investments, Guernsey has been administering clean technology and ESG funds for quite a few years. The Green Fund is building on our expertise and should help to attract further investment.
The London Green Finance Initiative, which Guernsey has an agreement to work with, has highlighted the need to untangle the value chain to unlock the private capital required to make green finance much more widely available through society.
The argument goes – where there is capital from issuers, there will be opportunity for investors.
But our own recently published research has found that investment from the family office and private wealth sector into the green and sustainable market has been restrained, and slower than expected.
Conventional wisdom is that green and sustainable investing is becoming increasingly more important for private capital, particularly where family wealth is being restructured for inter-generational wealth transfer. But it appears that there may be a delay in significant investment coming into the green space until we see that inter-generational transfer of wealth. If that is true, can that transfer come quickly enough to make a difference?
Or is it the prospect of improved returns which would encourage green investing? It appears that despite the populist rhetoric – be it saving the planet, the ice caps, or the polar bear – our research indicates that when it comes to investments, the number one concern for the owners of private wealth and their advisers, is preservation and growth of capital.
Sir Roger Gifford, former Lord Mayor of London and chair of the London Green Finance Initiative, was the keynote speaker at our flagship London funds event in May this year. He said that there is the potential for market transformation, with different types of purpose-led finance, driven by global coordination between different sectors.
‘This isn’t really a competition between London, Guernsey, and Paris, this is a global problem that we have around climate change, and we have to solve it through discussions and sharing best practice,’ he said. ‘Finance has a unique ability to play a transformative role in driving this and offering practical ideas, and we need the right governance, the right risk management, willing investors, and enabling finance centres.’
Guernsey is a centre of expertise for green finance, and has been involved in investment funds and family office services for more than half a century. Guernsey trustees, corporate structures, banks, and investment and fund managers are frequently used for family offices established in London, Geneva, and elsewhere, and also based in Guernsey.
They like Guernsey’s specialisms and the pool of talent in these sectors, as well as Guernsey’s traditional attributes of political security, low crime, tax transparency, and the economic substance provisions confirmed by the European Union and OECD earlier this year.
Dr Andy Sloan, Chair of Guernsey Green Finance and Deputy Chief Executive, Strategy, at Guernsey Finance, is responsible for the development of jurisdiction-wide financial services strategy. He joined Guernsey Finance permanently in August 2018, following a six-month part-time secondment from the Guernsey Financial Services Commission, where he was Director of Financial Stability and International Policy Advisor. He is a member of States of Guernsey advisory groups on international tax policy, and Brexit, and is a member of TheCityUK’s ISRG regulatory coherence working group and the BVCA’s Channel Islands Policy Group.