The Jersey Financial Services Commission (the "JFSC") has recently introduced new disclosure requirements in respect of funds which are marketed on the basis of making investments which contribute to either an environmental or social objective ("Sustainable Investments") ("ESG Funds"), to address the risk of Sustainable Investments being mislabelled. This was in response to growing international concern about firms marketing investments that appear more environmentally and socially focussed than they really are, and changes to international regulation.
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Jersey Funds
When a Jersey ESG Fund (i.e. a Jersey Private Fund or a Collective
Investment Fund) is marketed on the basis of investing in a
Sustainable
Investment as part of its investment objective, it must disclose
(via website, or pre-contractual document, private placement
memorandum, offer document, or documents in which the terms of
investing in the fund are contained such as a subscription
agreement) all material information in relation to the sustainable
investment strategy and objectives; including but not limited
to:
- alignment with any specific taxonomy, or where there is no alignment to a specific taxonomy a statement to that effect;
- the proportion of investments that are sustainable;
- the basis on which due diligence, benchmarking, and performance measurement and reporting, are likely to be conducted; and
- any limitations to methodologies and data.
Funds Services Businesses
Similarly, when a funds services business (i.e. a Jersey fund
service provider regulated for the conduct of fund services
business under the Financial Services (Jersey) Law 1998, the
"FS Law") (a "Registered
Person") provides services in relation to an ESG
Fund, the Registered Person is under an obligation to disclose the
same material information in respect of such an ESG Fund, but only
if:
- the Registered person cannot evidence that the ESG Fund has complied with the equivalent requirement in the Code of Practice for Certified Funds; and
- the Registered person is the governing body of the ESG Fund (e.g. self-managed fund, general partner or trustee) or otherwise accepts responsibility for the website, pre-contractual document, prospectus, or documents in which the terms of investing in the ESG Fund are contained such as a subscription agreement.
Where a Registered person is not subject to the disclosure
requirements set out above, the Registered Person must still notify
the JFSC, in writing, within five business days of the Registered
person becoming aware of the ESG Fund not disclosing such material
information in relation to the sustainable investment strategy and
objectives of the ESG Fund.
Investment Business
Persons registered to carry on Investment Business under the FS Law
that provide investment advice on ESG Funds must either inform and
make available to the client, the appropriate disclosure
information in relation to the sustainable investment strategy and
objectives of the ESG Fund, or inform the client if no such
disclosure information is available.
Updates to JFSC's JPF Guide and Codes of
Practice
Following feedback to the JFSC's sustainable investments
consultation, each of the below have been amended to set out the
relevant disclosure requirements in respect of ESG Funds:
- Certified Funds Code of Practice;
- Fund Services Business Code of Practice;
- Investment Business Code of Practice; and
- Jersey Private Fund Guide.
Effective Dates
For Jersey Private Funds, Collective Investment Funds and Funds
Services Business, the effective date for new funds created on or
after 15 July 2021 is 15 July 2021, and for funds which existed
prior to 15 July 2021 the effective date of 17 January 2022
applies. For Investment Business, the effective date for new funds
is January 2022.
Walkers' Jersey funds team has advised on the launch of a
number of ESG Funds and was actively involved in the consultation
and drafting stages of the new ESG rules summarised in this
briefing. Please contact your usual Walkers contact if you wish to
find out more.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.