Originally published in Blue Skies, December/January 2012
In Guernsey there has been considerable interest in harnessing the natural environment and in particular, the wind, tides and waves as sources of energy. However, there is also significant potential for our finance industry to provide products and services which assist in the innovation, development and introduction of clean technology (cleantech), including renewable energy, around the world.
During the last 50 years, Guernsey has established itself as a leading international finance centre. Distinguishing features of our finance sector include its breadth and the ability to take the lead and build up expertise in providing niche products or services, such as captive insurance, private equity and infrastructure funds.
Guernsey Finance has now established a group in Guernsey which is specifically looking at how the banking, insurance and in particular the funds sector can capitalise on the rapidly growing cleantech sector. The sector includes tidal, wave, solar and wind power amongst others, together with nascent research to find new sustainable technologies. Therefore the development underpinning the use of these energy sources on a commercial level varies quite dramatically. For example, tidal and especially wave power are at a less advanced stage than wind power which has a level of maturity.
These differences mean that the type of investment required varies, as do the investors. Advancing brand new technologies needs funding for research and development, essentially innovation, whereas the construction of wind farms requires investment into infrastructure. Guernsey's advantage is that it has developed an investment industry with the critical mass and expertise of a range of providers who service all types of funds, from the vanilla right through to the esoteric.
This diversity has helped the sector insulate itself from the worst effects of the financial crisis and rebound more quickly than many of our competitors. Guernsey's funds industry had assets worth more than £274 billion at the end of June 2011 – up 4% in the quarter and 22.5% year on year. In particular, Guernsey remains extremely popular with promoters in alternative and niche asset classes and especially where there is a demand to access capital markets.
One of our greatest strengths is the ability for Guernsey structures to list on the Channel Islands Stock Exchange (CISX) (which has more than 4,500 securities listed), Euronext Amsterdam, the exchanges in Frankfurt, Toronto and Australia, as well as the London Stock Exchange (LSE). Indeed, data from the LSE shows that there are more Guernsey entities listed on its markets than there are vehicles from any other competitor jurisdiction.
In addition, Guernsey has received the green light for our companies to list on the Hong Kong Stock Exchange (HKEx). This approval is a particularly significant step in helping us to diversify our business base by attracting new flows from the 'emerging' markets of China, India and Russia.
Interestingly, what we are now seeing is that the rapid development of the emerging markets is pushing up demand for energy. Therefore, these centres are increasingly being seen as markets for the location of cleantech infrastructure and the consumption of renewable energy. This convergence is of extreme interest to us in Guernsey where we are focusing on both emerging markets and renewable energy.
Indeed, it has recently been announced that Crescent Capital, a Turkish-based fund manager focused on clean energy and infrastructure, has launched a Guernsey-domiciled closed-ended, registered fund. The Clean Energy Transition Fund, L.P. (CETF), which aims to raise a target amount of €200m by the end of 2012, has already attracted a total of €100m commitments from investors including the European Bank for Reconstruction and Development and the European Investment Bank. CETF is Turkey's first private equity fund with a focus on the energy sector. It will target investments in renewable energy generation projects predominantly in Turkey and South Eastern Europe.
This demonstrates that there is already renewable energy business coming into Guernsey. The working group we have established is currently undertaking research to identify the extent of this business, its precise nature and the potential future opportunities for Guernsey in this sector.
Of course, one of Guernsey's greatest strengths in this space is that we have on-island experience of developing renewable energy technology. The close relationship between the two is illustrated by the fact that we have representation from the renewables development team and Commerce & Employment, as well as representatives from across the finance industry and professional service firms.
Developing ways to harness the natural environment locally and our finance industry providing products and services which assist in the innovation, development and introduction of renewable energy technology around the world are what you might call two sides to the same coin.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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