Enhancing Sustainable Finance in the Bailiwick
5th May 2022The Commission has today published a Consultation Paper proposing the introduction of a Natural Capital Fund regime. It is also, through a separate Consultation Paper, bringing forward proposals to counter the risk of greenwashing. Both Consultation Papers can be found here.
Creating an Ecosystem for Natural Capital Investment
The first Consultation Paper proposes the creation of a Natural Capital Fund designation to complement the Bailiwick’s existing, climate change focused Guernsey Green Fund regime1. The proposed rules would create a new designation for funds that are committed to making nature positive investments2. 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.
To be eligible for the Natural Capital Fund designation, funds will be required to set and monitor appropriate targets aligned with the Convention on Biological Diversity’s Post-2020 Global Biodiversity Framework’s 2030 Action Targets and relevant United Nations’ Sustainable Development Goals. The required measurements relating to these targets and the controls around those measurements should give investors’ confidence that Natural Capital Funds’ sustainable investment objectives align with investor expectations1.
No Greenwashing
In its second Consultation Paper, the Commission seeks to enhance levels of confidence in the Bailiwick’s sustainability framework by introducing measures that help mitigate the potential risk of greenwashing3. The proposed guidance reinforces the Commission’s expectations relating to disclosure requirements and applies where explicit sustainability claims are made in an offering or promotion. The Commission is not aware of any greenwashing practices being undertaken by licensed Guernsey-based entities. That said it is important to guard against the risk of greenwashing and the Commission is consulting to keep the Bailiwick in step with other developed jurisdictions’ investor protection measures. This consultation paper also seeks views on future consideration of anti-greenwashing measures for other sectors beyond investment licensees and funds.
Speaking about the publication of these papers, the Director General William Mason, said, “In 2018, the Commission launched the Guernsey Green Fund creating what we believe was the world’s first regulated green investment fund. The Natural Capital Fund proposals and the accompanying measures to counter greenwashing are designed to allow the Bailiwick to continue to develop as a leading centre for sustainable finance. We hope that Natural Capital Fund regime on which we are consulting may play a useful part in helping rebuild the planet’s stock of natural capital, enabling more businesses to work in harmony with nature.”
1In 2021, the Commission undertook a Thematic Review of the Guernsey Green Fund Regime because it wished to be able to provide assurance to investors and those thinking of making green investments, that funds enjoying use of the Guernsey Green Fund Accreditation are investing in projects which comply with the criteria for green investments set out by the multi-lateral development banks. The review found that Guernsey Green Funds appear to be being invested properly in appropriate assets.
2Nature-positive investments are those with an objective to contribute positively to and/or significantly reduce the harm done to the natural world, including through transitional strategies.
3The term “greenwashing” refers to the practice of misrepresenting sustainability-related practices or the sustainability related features of investment products.