ASK MAT - IN JERSEY, WHAT DOES SUSTAINABLE FINANCE MEAN

ASK MAT - IN JERSEY, WHAT DOES SUSTAINABLE FINANCE MEAN

MAT SAYS:-

In Jersey, sustainable finance integrates environmental, social, and governance (ESG) factors into financial decision-making. This approach aims to ensure that financial activities contribute positively to the long-term sustainability of people and the planet.

Jersey's government and financial institutions are actively working to develop a regulatory framework that supports sustainable finance, aiming to balance economic growth with environmental and social responsibilities.

Here are some key aspects:

1. Environmental Considerations: This includes efforts to reduce greenhouse gas emissions, invest in renewable energy, and preserve biodiversity.
2. Social Considerations: Promoting equality, diversity, and inclusion to foster responsible and inclusive business practices.
3. Governance: Ensuring robust management structures, fair executive remuneration, and good employee relations to align company objectives with ESG factors.

ACCORDING TO THE JFSC, IN JERSEY, SUSTAINABLE FINANCE MEANS:-

• Sustainable finance integrates environmental, social, and governance (ESG) factors into financial decision-making.
• While profit and economic growth remain essential, the long-term sustainability of people and the planet is also a key driver in today’s financial landscape.
• Environmental considerations might include reducing greenhouse gas emissions, investing in renewable energy, or preserving biodiversity.
• Social considerations, such as promoting equality, diversity, and inclusion, are essential for fostering responsible and inclusive business practices.
• Governance involves management structures, executive remuneration, and employee relations. Ensuring robust governance practices helps align a company's objectives with ESG factors.
• However, with the rise of sustainable finance comes the risk of greenwashing, where businesses falsely portray themselves as more sustainable than they are.
• This misleads investors who seek to make positive impacts with their investments.
• To combat this, the Jersey Financial Services Commission introduced anti-greenwashing codes of practice in 2021 for several sectors.
• Sustainable finance offers exciting opportunities to make a positive impact, but requires careful consideration to avoid misleading claims. Investors must stay informed and vigilant when making investment decisions in this area.

JFSC 2021 code updates

• The Jersey Financial Services Commission (JFSC) published new disclosure requirements relating to sustainable investment for specific sectors
• The requirements aim to address the risk of GREENWASHING (funds being mislabelled as having a sustainable objective) and will apply to:-
• Certified funds,
• Certain fund services businesses,
• Jersey private funds and
• Investment advisers.
• Following consultation with relevant industry stakeholders, the disclosure requirements are a proportionate response to changes driven by evolving international standards in environmental, social and governance (ESG).
• https://www.jerseyfsc.org/industry/consultations/consultation-paper-on-disclosure-requirements-related-to-sustainable-investments/
• The requirements are set out in the updated codes of practice applicable to the Jersey Private Fund Guide and the Jersey Private Fund Guide.

JFSC codes definition

• 'Sustainable Investment' is defined as an investment that contributes to an environmental or social objective. 

• The requirements DO NOT
• Replicate equivalent provisions of the EU Sustainable Finance Disclosure Regulation (SFDR) and
• And for funds, the requirements DO NOT
• Depend on the nature and degree of the fund's sustainable objective.
• Rather, they apply to all funds marketed based on sustainable investments as part of their investment objective.

JFSC - Funds and fund services providers

• Where a fund is marketed as such, it will be required to disclose all material information about 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 sustainable investments.
• The basis on which due diligence, benchmarking, performance measurement and reporting are likely to be conducted; and
• Any limitation to methodologies and data.
• The JFSC has not issued a prescribed template for the disclosures to enable funds to meet their obligations, utilising existing templates where appropriate.
• As far as fund services businesses are concerned (that is, Jersey service providers which are regulated in the conduct of fund services business under the Financial Services (Jersey) Law 1998 (Registered persons)), the obligation to ensure that a fund complies with the disclosure requirements will only apply:
• When the Registered person cannot provide evidence that the fund has complied with the requirements imposed on the fund under the relevant code of practice; and
• To Registered persons which are the 'governing body' of the fund (self-managed funds, general partners or trustees/managing trustees) or which otherwise accept responsibility for the document in which the disclosures are made, under Jersey regulatory requirements, in that such persons have responsibility around the investment objective and marketing of the fund.
• Registered persons will be required to notify the JFSC in writing within five business days of becoming aware that the fund has not made the requisite disclosures regarding the fund's sustainable investment strategy and objectives.
• For new funds, the effective date for the disclosures, which may be made via a website, pre-contractual document, prospectus, or documents in which the terms of investing in the fund are contained (such as a subscription agreement), is 15 July 2021.
• For funds in existence before 15 July 2021, a six-month transitional period with an effective date of 17 January 2022 will apply.

FSB CODES SAYS

Investment advisers

• The requirement for entities which are regulated in the conduct of investment business under the Financial Services (Jersey) Law 1998 and which provide investment advice to clients about a fund that is marketed based on investing in a Sustainable Investment is:
• To inform and make available to the client the appropriate disclosure information about the sustainable investment strategy and objectives of the fund; or
• To inform the client if no such disclosure information is available.
• The effective date for the disclosures is 17 January 2022.

Investment codes say

References

• About sustainable finance — Jersey Financial Services Commission - https://www.jerseyfsc.org/industry/sustainable-finance/about-sustainable-finance/
• Sustainable Finance In Jersey - Government of Jersey https://www.gov.je/Government/Consultations/Pages/SustainableFinance.aspx
• Jersey’s Sustainable Finance Action Plan - PwC https://www.pwc.com/jg/en/services/advisory/blogs/jerseys-sustainable-finance-action-plan.html