Enhancing sustainable finance in Guernsey

The Guernsey Financial Services Commission (GFSC), the island’s regulator, announced the official launch of a new product in Guernsey’s sustainable funds regime – the Natural Capital Fund – following consultation over the last few months.

The Natural Capital Fund regime creates a regulatory designation for funds to help channel investment into biodiversity and natural capital projects that make a positive contribution and/or significantly reduce harm to the natural world. The intention is to provide environmentally conscious investors with assurance that  their capital is deployed in efforts to promote the protection and recovery of the Earth’s natural environment.

It will allow managers to invest in not just green companies, but also those ‘imperfect’ companies to significantly reduce the environmental damage they do.

GFSC Director-General William Mason (pictured) explained that developments in Guernsey demonstrated the island as a world leader in sustainability, with initiatives that were being noticed in the EU and beyond.  He said: “Guernsey is good at doing complex things, and doing things flexibly, which some bigger regulators find difficult. We can make a big difference by doing something slightly different from the mainstream.

“It is exciting to do something to push the planet in a positive direction. We hope to make a small difference to the planet. It is a good opportunity to help more private sector funds with nature protection at their heart.”

The new regime was introduced and discussed in a session with William and the GFSC’s Director of the Investment, Fiduciary and Pension Division Gillian Browning.

When asked why this new structure was an addition to the Guernsey Green Fund, rather than part of it, Gillian explained that each would address the ‘twin crises’ – the degradation of nature and the climate crisis – respectively as overlapping, distinct problems and also address a funding gap in the natural capital space.

William added: “Decisions on natural capital are more nuanced. Having a separate designation is attractive to a different investor base.”

The GFSC has also expanded the green criteria of the Guernsey Green Fund regime to include the EU Taxonomy for Sustainable Activities’ technical screening criteria for activities contributing to climate change mitigation and adaptation.

Guernsey Finance also announced the publication of its new report, in association with Baringa Partners, identifying the vital role financial services can play in achieving a just transition to a net zero future.

In the day’s first panel session, panelists discussed the business opportunities in biodiversity finance.

Chair of the Environment Agency Emma Howard Boyd said that those working on the climate agenda are seeing events playing out in the real world much sooner than anticipated: “We have to employ our best investment strategies as soon as possible. We need to green the financial system, but we also need to finance green. Regulators must talk to each other and make sure the mechanisms we put in place will deliver real change on the ground.”

However, she added that while return was key to investors, it was important to be consider on whose behalf investment decisions were being made: “Decisions must be made for all, not for the few.”

Olly Hughes, Managing Director of Forestry at Gresham House, stressed the need for private capital to finance sustainability: “In the current climate, I don’t feel we can continue to look to governments for support. It has to be private capital.”

The week’s first fringe event was hosted by the Guernsey Green Finance Strategy Group, with the session led by Stephen Nolan, Managing Director of the United Nations’ Financial Centres for Sustainability, of which Guernsey is a member.

He spoke of how Guernsey can lead the way in upskilling its workforce to deal with the challenges presented in moving towards a more sustainable way of working and better equipped to tackle greenwashing.