Environmental, social and governance (ESG) principles are now a significant factor for consideration within the finance industry. Investors are increasingly focussing on these principles as part of their analysis process in respect of identifying material risks and growth opportunities.

Some market commentators have suggested that demand for sustainable investments overtook traditional products in 2020. Morningstar has reported that ESG funds have captured US$51.1 billion of net new money in 2020 which is not only a record but is double the prior year performance.

With COP26 concluding in November 2021 environmental impact and sustainable investing are a major priority of investors and at the top of the agenda of the financial markets more generally. The Biden administration continues to see climate change in particular as a focus for the remainder of its term. On 3 November the Financial Conduct Authority (FCA) published a discussion paper on UK Sustainability Disclosure Requirements (SDR), inviting views on potential criteria for the labelling of investment products. Although the FCA has already consulted on introducing climate related disclosures, the current discussion paper suggests going further than this to require disclosure in relation to sustainability matters more broadly. New requirements may require investment products to display a label reflecting their sustainability characteristics and product-level SDR disclosures. The aim would be to promote transparency and trust through high-quality sustainability disclosures, hold businesses to account in their use of such terms and protect investors from the risk of greenwashing.

In this context, the Appleby Regulatory team in each of the Crown Dependencies consider the approach of the regulators in their respective jurisdictions and how the regulatory landscape in respect of ESG and sustainable investments is evolving.


This year, following consultation with industry, the Jersey Financial Services Commission (JFSC) introduced disclosure requirements for funds in order to mitigate the risk of greenwashing. This was to address growing international concern in respect of firms marketing investments that appear more environmentally and socially focussed than they really are.

Feedback to the initial consultation was published in June, which confirmed that amendments would be made to various Codes of Practice and the Jersey Private Fund Guide, with the aim of improving the clarity of sustainable investment requirements, enhancing consumer protection and contributing towards Jersey continuing to at least meet the latest international standards in respect of ESG and its approach to greenwashing in particular.

In many of the Codes of Practice issued by the JFSC for Fund Service Business, Investment Business, Collective Investment Funds and the Jersey Private Fund Guide (the JPF Guide), there will be a new definition inserted, as follows:

Sustainable Investment: an investment or investments which contribute to either an environmental or social objective.

Each of these Codes and the JPF Guide will be updated to provide obligations in respect of the fund or registered person in each case to ensure appropriate disclosures are made when a fund is marketed on the basis of a sustainable investment as part of its investment objective, or investment advice is given by a registered person to a client in relation to a fund that is marketed on the basis of investing in a sustainable investment as part of its investment objective.

Whilst many of the changes made were effective on 15 July 2021, a six-month transition period applies, with an effective date of 17 January 2022. Established regulated funds and registered persons will therefore have until this date to ensure pre-contractual documents, marketing materials and possibly subscription agreements contain all material information in relation to the sustainable investment strategy and objectives, where appropriate. Those registered by the JFSC to provide investment advice will also need to consider ensuring compliance with the Code of Practice for Investment Business by making information available to a client that contains appropriate disclosures in relation to any sustainable investment strategy.

As the regulatory environment in the EU, US, UK and indeed ESG best practice principles continue to evolve and strengthen towards the labelling of sustainable investment products further, and as we see more private equity firms and other investors committing to sustainability as a core driver of financial value, it will be interesting to see how the JFSC responds and whether further requirements and obligations will be introduced by the JFSC in due course.

Finally, just this month, the JFSC has published an industry update announcing that it has been accepted as a member of the Network for Greening the Financial System (NGFS). The NGFS is a network for Central Banks and Supervisors who, on a voluntary basis, exchange experiences, share best practices, contribute to the development of environment and climate risk management in the financial sector. The JFSC is clearly keen to demonstrate contribution and collaboration in this growing global trend, and ensure that Jersey maintains its ability to attract business from around the world and support adherence to global standards.


Like their global competitors, Guernsey's regulator and its local business associations have been busy in the ESG space this year. The Guernsey Financial Services Commission (GFSC) set up a "spring green consultation" early in 2021 and many new developments and initiatives came out of the results of this work with industry.

Green Insurance Accreditation

In May 2021, Guernsey created the world's first ESG frame work for insurers, showing a commitment to sustainability across the whole financial industry in Guernsey.

Guernsey is a member of the UN Finance Centre for Sustainability, the Network for Greening the Financial System and the UN's Sustainable Insurance Forum. The new Guernsey framework follows the United Nations' recommended approach of incorporating ESG processes to align sustainable development goals with the outcomes of financial services products, services and investments made by the insurer.

The Guernsey framework sets out four pillars of requirement which must be fulfilled to comply with the framework. They are:

  • To embed ESG within the decision making and governance structure;
  • The risks underwritten to contribute to achieving the sustainable development goals;
  • The investments held to contribute to achieving sustainable development goals, and

The insurer to publicly disclose how it has met the framework's requirements.
The framework was designed by the Guernsey International Insurance Association (GIIA) with the aim of assisting its member organisations to manage new ESG opportunities and risks so that they could deliver positive ESG impact. The Guernsey framework enables insurers and insurance managers who are members of GIIA to self-certify and they are now in the process of creating a kitemark through a third-party accreditation process.

Guernsey Green Funds

In 2019 the GFSC established the Guernsey Green Fund accreditation. The objective of the Guernsey Green Fund was to provide a platform upon which investments into various green initiatives could be made. The Guernsey Green Fund enhances investor access to green investments by providing a trusted and transparent product that contributes to the internationally agreed objectives of mitigating environmental damage and climate change.

Investors in a Guernsey Green Fund are able to rely on the Guernsey Green Fund designation, provided through compliance with the Guernsey Green Fund Rules, to represent a scheme that meets strict eligibility criteria of green investing and has the objective of a net positive outcome on the planet's environment.

The GFSC allows any class of Guernsey fund to be designated as a Guernsey Green Fund as long as it meets the eligibility criteria. An authentic Guernsey Green Fund is allowed to use the Guernsey Green Fund logo and may voluntarily commit to adopting additional ESG principles to further enhance the product. There are currently 14 Guernsey Green Funds registered in Guernsey. For more information see here.

In July 2021, the GFSC amended the Guernsey Green Fund Rules following a thematic review of such rules and their usage. The latest amendments protect investors even further from greenwashing whilst reducing the administrative burden of some of the original monitoring criteria.

Isle of Man

The Isle of Man is the first entire nation to have been granted UNESCO Biosphere status in recognition of its special environment, culture, heritage and economy.

In September 2021, the Isle of Man Treasury announced the issuance of £400 million of 30 year Sterling sustainable bonds, listed on The International Stock Exchange (TISE). The issuance is in line with the Isle of Man Government's Sustainable Financing Framework, which aims to reinforce its commitment to sustainability and considers green, social and sustainability financing instruments as key to support its efforts while providing national and international investors with the opportunity to diversify their investments with more sustainable assets. Eligible projects covered in the Sustainable Finance Framework encompass a broad range of areas including clean transportation, energy efficiency, affordable housing, education and healthcare.

The Sustainable Financing Framework was developed in accordance with the Green Bond Principles 2021, Social Bond Principles 2021, Sustainability Bond Guidelines 2021, Green Loan Principles 2021 and the Social Loan Principles 2021. It facilitates the issuance of Bonds / Loans, Social Bonds / Loans or Sustainability Bonds. In accordance with the Sustainable Financing Framework, the Isle of Man Treasury will adhere to best practices in the market and, where possible, align the Framework with the EU's classification of environmentally-sustainable activities "EU Taxonomy Climate Delegated Act" and similarly take into consideration the UK Taxonomy, as and when developed.

Like the JFSC, the Isle of Man Financial Services Authority (FSA) is also a member of the NGFS, elevating its understanding of the role that supervisors need to play to achieve the net zero targets being set by governments worldwide. The FSA is increasingly looking to firms to understand their strategies around the management and disclosure of climate related and environmental risks, having noted this in its annual report published in October 2021.

The FSA recently established an internal working group to help develop and shape the FSA's strategies and policies on assessing climate related and environmental risks, including for prudential and conduct supervision. The FSA plans to continue engagement with firms in 2022 to help determine which financial sectors may be most exposed to climate related and environmental risks and to develop a strategy to support how these risks will be integrated into supervisory work.


Regulators around the world, including the Crown Dependencies, are responding to the fact that nearly all growth in active asset management is in sustainability-linked funds. Financial services businesses are all reviewing their own governance and profiles in this area - investment activity is demanding a need for businesses to rethink their priorities, reconsider stakeholder relationships and assess their impact in the context of ESG issues. The JFSC, GFSC and Isle of Man FSA are no exception to this.

Regulation in this area is not with a view to limiting investment activity - but rather ensuring that investments go where they are intended and to guard against greenwashing. The quality and quantity of ESG data will continue to improve as reporting requirements grow. The regulatory framework around this data is also fast developing – regulators are addressing the lack of clear definitions and standardised data and, where possible, introducing uniform requirements to help to simplify this for investors and make reporting progress towards ESG targets easier for businesses.

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