Dr Andy Sloan, Acting Director of Strategy at Guernsey Finance, explains the rationale and the proposed operation of Guernsey's new world-first regulated green fund project.
Global investments are shifting focus to the environment, with transitioning to a greener future reported to need some $1 trillion of investments each year.
So it is important for financial centres such as Guernsey to adapt to the increasing demand for green investments. We are able to take advantage of what this movement has to offer, and in the creation of Guernsey Green Fund Rules, we can assure investors that their investments are being used for environmental purposes that are established and monitored against a reliable set of standards.
The product will allow Guernsey to be at the forefront of the initiative to mitigate the risks associated with climate change, and promote engagement in climate change issues.
Guernsey has the benefit of already being a secure and experienced jurisdiction in which to hold investments and has the wealth of knowledge and expertise necessary to build a green fund platform on top of existing versatile structures. Securing capital for environmental purposes is a strong indication that Guernsey is an innovative and forward-thinking place in which to do business, and demonstrates that we are mindful of international climate obligations.
The objective of the GGF is to provide a platform upon which investments into various green initiatives can be made. The GGF will enhance investor access to the green investment space by providing a trusted and transparent product that contributes to the internationally-agreed objectives of COP21, the 2015 United Nations Climate Change Conference, and provides certainty, consistency and simplicity for investors.
Investors in a GGF will be able to rely on the GGF designation, provided through compliance with GGF rules, to represent a scheme that meets strict eligibility criteria of green investing and will have the objective of a net positive outcome on the planet.
The green bond market has picked up pace over the past few years, exemplified in the growing number of global stock exchanges which have specific segments dedicated to listing bonds which finance environmental projects. At the end of 2017 the London Stock Exchange reported a 57% growth of its listed green bonds in one year, with more than $20 billion raised. International standards for the green bond market are being established.
Green funds are at an embryonic stage. Investors remain hesitant to invest in funds which may not ring true to their green label, or do not want to sacrifice a good return for the sake of the environment. The GGF rules use standards developed by international financial institutions with the appropriate scientific background to ensure that the various assets held in a GGF are green within the true meaning of the word.
Any type of fund can apply to be a green fund, and under the guiding rules and principles will have to invest in themes such as renewable energy, lower carbon and efficient energy generation, energy efficiency, agriculture and forestry, waste and waste water and transport.
The development of the green rules was facilitated through Guernsey industry and government strategy groups and now the consultation document welcomes feedback from all parties interested in green investment.
Green has been Guernsey's national colour for more than 100 years – now it is time for our funds sector to show its colours.
For more information about Guernsey's finance industry please visit www.weareguernsey.com.
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