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Endless Opportunities in Sustainability - Funds Forum key takeaways, Panel Session 1

19 May 2022

"Endless opportunities" was the upbeat theme of WE ARE GUERNSEY'S 2022 Funds Forum, with two panels exploring how sustainability and technology will help drive the post-pandemic economic recovery globally. 

There are, of course, headwinds. As keynote speaker for the event, renowned economist, author and broadcaster Dharshini David delivered a canter through recent events that have led to the current state of the global economy. While she pulled no punches in her assessment of our challenges, she was cautiously optimistic about the future.  

Dharshini asked whether inflation and rising costs of living across the world posed a threat to the progress toward a carbon-neutral future. She questioned whether net-zero had become a 'nice to have', acknowledging that sustainability is driven by customer choice, but must also make commercial sense for industry with a need for clear global political leadership.

While Dharshini took comfort in humankind's ability to innovate and adapt in order to find climate solutions, with these abilities evident during the pandemic, she added that without data to scrutinise, progress might be lost. Transparency and trust were themes that permeated the first panel session.

Panel 1, 2022 Guernsey Funds Forum

Panellists

  • Gillian Browning - Director of the Investment, Fiduciary and Pension Division - Guernsey Financial Services Commission 
  • Dylan Cox - Head of Private Markets Research - PitchBook 
  • Lorraine Johnston - Partner – Ashurst 
  • Sona Stadtelmeyer-Petru - Executive Director - J.P. Morgan 

 Key takeaways

  • Regulation of climate-orientated investments was initially about exclusion and reducing risk for investors; that perception has evolved to signal opportunities for impact and returns.
  • Progress is needed on a consistent taxonomy. Currently, there is no shortage of ESG standards out there, with UK and Europe taking different policy approaches to regulation and indeed the meaning of sustainability itself. Guernsey's approach to regulation has been to develop policy that refers to existing standards or overlays what is out there while ensuring it's relevant and proportionate to the market. 
  • After the last decade's climate tech boom-bust, there is a clean-tech 'hangover' and investors may be cautious when approaching ESG focused investment products. But, three key differences in today's market should help us avoid the mistakes made 10 years ago. These are:

    - The amount of regulation that now exists;
    - Politicians and society are more alive to the urgency of climate issues;
    An awareness of what can go wrong if the focus is only on purpose as opposed to coupling purpose with financial return.
  • A significant challenge is a lack of quality data, particularly around areas such as biodiversity. Typically, data is backwards-looking and not always complete. Without data to create confidence that the impact of the investment is measurable, capital flows into environmental assets could be slowed. Alongside data, it's helpful to have an understanding of a company's carbon-neutral pathway and be in the right place to challenge them. Collaboration and transparency are critical. 
  • The risk of greenwashing looms large; however, to some extent, that comes from having so many different definitions, fund ratings and standards. It's early days in terms of systematic data for sustainable investments. A lack of consensus can lead to accusations and mudslinging. Companies must be held accountable without creating a negative dialogue around a sector.  

  • The next frontier for sustainable investment is natural capital and biodiversity. Investors will need assurance about entering this fast-moving space. Like the world-first Guernsey Green Fund, natural capital-regulated funds will help create trust and, therefore, investor interest in this sector.  
  • Every step towards net zero is a step into a new world. It is a learning process for everyone as this new era is built and progressed. Regulation provides the scaffolding to help asset managers think about what is in the fund and build trust in the sector for investors.  
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