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Magazine Issues » October 2021

Jersey roundtable: The resilience factor

Funds Europe – Jersey Finance launched its sustainable finance strategy in March. How is Jersey’s financial sector transitioning to a more sustainable future and how is helping fund managers to comply with the EU’s Sustainable Finance Disclosure Regulation (SFDR)?

Refson – Sustainable finance is being driven by investors. Clearly you’re seeing fund managers respond to the demand for it, and the trend is accordingly filtering through the ecosystem that supports the industry – to the lawyers, administrators, etc. But you need to look at the definition of what sustainable finance is, and simply put, that is making a difference to the good as a by-product of investment, but what that difference is in the eyes of each and every investor.

On the back of that, in supporting sustainable finance, the role of the IFC [International Finance Corporation] has to be more than simply regulation. This role is to respect that mindset and cater to it in a holistic way and provide an environment where it’s embedded across all sectors of society. This is exactly what Jersey is doing through a combination of strategies, and that’s based on the work not just of ourselves but of the government, the recent consultation and regulation put into place by the JFSC [Jersey Financial Services Commission], and our own Jersey for Good project, which sets out a two-year plan to accelerate our journey to a sustainable future by 2030.

All of these initiatives are underpinned by the Jersey for a Wilder World programme, which allows the intermediaries in Jersey to start the conversation and make a positive impact for good.

From a regulatory perspective, the JFSC has implemented an anti-greenwashing disclosure requirement law, and they’ve done it in such a way that if any or all parts of that reporting is carried out in another jurisdiction, then the JFSC will accept the reporting in the same format, which just makes it a bit easier, which addresses your point directly to SFDR.

Taylor – If you look at some of the recent JPF statistics, DSPs make up 72% of the directors on boards, and 40% of those directors were also class-G regulated. This demonstrates we can add value from a governance perspective using our expertise. We can also ensure that the message from an ESG [environmental, social and governance] perspective, and SFDR, the aims and goals of what the regulation’s all about, are really being executed properly with substance and it’s not just lip service.

However, the industry needs to be careful that it is not allowing the new regulations to become a way of masking greenwashing. There’s always a risk with regulation, when it tries to prevent something, that people do the bare minimum to comply as opposed to what the real aim of the regulation is for. We can really add some value in this space, and I know there are already some providers that are looking at services in relation to areas like SFDR.

Baird – From my perspective, it’s about education, and about implementing and understanding the principles.

A lot of people will try hard to define the likes of ‘ESG’ and ‘sustainable investment’, and try and commoditise it – but what does it really mean? Can you sell it? Can you package it up? The answer in short is no, it’s a set of behaviours.

I also don’t think investors are going to give up returns for sustainable investment criteria being met. [Sustainable finance] is definitely gathering momentum, but there’s a lot more to do.

Honeywood – In terms of just trying to make things a little bit more tangible, one thing we’re doing at the minute is partnering with the Accounting for Sustainability NGO. We’ve got a colleague writing a guide to demystify some of the non-financial reporting requirements, which SFDR will require, but which is also what investors are expecting.

We’re really proud to partner with that organisation and try and come up with a non-financial ESG reporting framework guidance that does mirror the very well-known and tried-and-tested financial reporting framework which we all use day in, day out. Hopefully that should add a bit more tangibility around some ESG elements.

Macleod – There is a challenge that GPs [general partners] are grappling with at the moment as to what best practice looks like, which is not helped by a lack of harmonisation in standard-setting (although this is improving). With such uncertainty, the last thing a GP wants to do is launch a fund in a jurisdiction which could come under scrutiny from an ESG/sustainability perspective. What really helps is that Jersey is on its front foot from a regulatory point of view. That sends a really good message out to GPs and indeed LPs. Again, it makes Jersey more compelling when it comes to choice of fund domicile.

Cruickshank – Pressure is intensifying on fund managers to keep up with investors’ demands for ESG products. In our survey, 76% of European alternative investment respondents agreed that the vast majority of funds will invest according to ESG principles in the next three years.

The demand is obviously there, it’s just a question of how quickly managers can implement ESG strategies that can be clearly and accurately measured, with greenwashing currently a well-publicised concern. As a result, Jersey continues to ensure it is at the forefront of these developments in order to support its client base. The JFSC has already introduced welcome changes to the fund regimes to address greenwashing and ensure that investors’ funds are invested as intended.

The issues that ESG initiatives look to solve continue to gain attention as policy and regulatory changes are implemented across the world in a bid to change habits and behaviours harmful to the environment and society. This means that compliance with sustainability standards is well on the way to becoming a basic requirement of our service offering to clients.