Guernsey Goes Green On A Global Stage

Guernsey does not often get the chance to operate on a truly global stage.

Although over the course of history our people have made a huge impact in wars, establishing international trade links, the arts and sport, it is rare that Guernsey, as a jurisdiction, has a chance to position itself globally.

Though we will have no formal representation at the United Nations Climate Change Conference, COP26, in Glasgow in November 2021, we will be there, hopefully in person and certainly in spirit.

Last summer, we organised a week-long event, Sustainable Finance Week, which should have taken place in Guernsey. COVID-19 put paid to that, but we continued with the event over the course of three webinars and three podcasts with international guests.

We also enjoyed the oversight and feedback of Tim Hames, former Director-General of British private equity industry group the BVCA.

He summarised the event thus:

“Guernsey has shown considerable imagination with regards to green and sustainable finance and it should view this as platform for bigger and better products. It should think of COP26 as an occasion of a type akin to the Olympic Games or the football World Cup. It should really want to be noticed by others”.

It has certainly been our aim to be recognised as a significant contributor to the green finance debate. Our membership of the United Nations’ Financial Centres for Sustainability (FC4S) network is well-established. We have a longstanding relationship with the UK’s Green Finance Institute. Our schedule of green finance events continues to position ourselves strongly on a local, national and international platform.

A number of themes emerged from the week, but we will focus on a selection of these to take forward through the industry steering group Guernsey Green Finance.

• The legacy of the COVID crisis has to be about the need for a new order in the economy and society and not simply the restoration of an old normal.
• The relationship between public capital and private capital will change – it is vital that there is a meaningful role for private capital here in the years ahead.
• Those who disproportionately have resources – be it high-net-worth individuals, family offices or conventional limited partners – have an obligation to show leadership. The line “billionaires will save the planet” is too crude, but they do have a vital role in recovery.
• We need a more holistic appreciation of the notion of systemic risk, and a much more enticing set of incentives to think about the longer-term before the short-term.
• Finally, many of those who already have a record of involvement in sustainable finance, and others who will now enter the frame, instinctively believe that they would have most effect via supporting impact investment rather than another round of involvement with enhanced ESG which, in many senses, is required but has become something of an industry in itself. There are differences in sentiment as to whether individuals and institutions should make direct investments in this space or operate on a co-investment basis or through specialist funds. Scale and skill sets vary considerably here, and that will have a major influence on strategies.

In a way the ‘ESG conversation’ post-COVID has almost become too loud. For sure, it is clear that limited partners (LPs) are expressing a clear desire to ensure conformance with ESG principles, but conversations by providers about trends in reporting are rarely grounded by the actuality of current provision and data issues.

Simple metrics and reporting are necessary. We are seeing the emergence of ESG reporting as a portfolio function for administrators here in Guernsey, given the island’s leadership in the development of sustainable finance product and services.

We must guard against costly complexity. For finance, there is a simple measure – carbon content of the portfolio and its path to zero.

Investors’ need for trusted, transparent product was the rationale behind our creation of the Guernsey Green Fund, the world’s first regulatory regime. A simple, straightforward notification and disclosure regime, aligned with international standards and designed to provide investors with confidence from a regulatory wrapper.

In a similar vein, our Green Principles for Private Equity, described at the time by market commentators as simple ESG principles, provided a straightforward guide to investing, aligned with the climate change agenda.

The private equity industry and private markets need the comfort and confidence of a robust investment product aligned with global standards, without the cost and complication of prescriptive rules.

There is plenty that we can still do. There is plenty that the world, and the global financial services industry, needs to do to finance climate change mitigation. These are immensely important subjects where there is a leadership void at present.

Guernsey has the will to stay at the forefront of this issue. For it is certain, the prize is large indeed.

Dr Andy Sloan
Deputy CEO, Strategy at Guernsey Finance, Andy is responsible for coordinating the development of financial services strategy for the island. He also established and chairs Guernsey Green Finance, the island’s sustainable finance initiative, and represents Guernsey at the UN’s Finance Centres for Sustainability Network.