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Guernsey proposes world leading Natural Capital Fund Regime

06 May 2022

Guernsey’s specialist financial services sector is celebrating yet another world first that will fortify its global reputation as a leader in sustainable finance.

Guernsey’s Financial Services Commission has published two consultation papers proposing the introduction of what could be the world’s first Natural Capital Fund regime accompanied by further guidance to guard against greenwashing.  

Once introduced, the regime will build on the success of Guernsey’s world-leading position in sustainable finance by creating a fund regime to help channel investment into biodiversity and natural capital projects.

The first Consultation Paper proposes the creation of a Natural Capital Fund designation that is committed to making nature positive investments. It will complement the Bailiwick’s existing regulated Guernsey Green Fund regime, which now channels more than £4.4 billion into green investments.

The second Consultation Paper seeks to enhance levels of confidence in the Bailiwick’s sustainability framework by introducing measures that help mitigate the potential risk of greenwashing.

Together the Guernsey Green Fund and Natural Capital Fund are designed to provide Guernsey funds with a choice of complementary sustainability designations based on international standards.

Stephanie Glover, Head of Sustainable Finance at WE ARE GUERNSEY, welcomed the development.

She said: “It is not possible for the world to reach net zero without being nature positive. Leaders in biodiversity finance have been calling for greater private investment and regulation to protect and restore the natural world.

“In the latest IPCC report, nature based solutions account for three of the top five solutions to limit climate change. The proposed Natural Capital Fund regime will drive investment into these solutions, and help investors be confident that their investments are going to projects that will protect the natural environment, avoid and capture carbon emissions.”

Josephine Bush, WE ARE GUERNSEY’S Sustainable Finance Strategic Advisor, added:  “The establishment of a Natural Capital Fund regime would be a significant step forward in the race to net zero, providing investors with confidence in economically viable business models that are aligned to international standards on reporting and nature based targets, ensuring transparency, good governance and mitigating the risk of greenwashing. 

“The protection of our natural environment deserves as much focus as the climate. Guernsey is leading the charge here yet again after the establishment of its Green Fund Regime in 2018.”

Deputy Nick Moakes, member of the States of Guernsey’s Committee for Economic Development and chair of Guernsey Green Finance Strategy Group, said: “The GFSC proposal to introduce a Natural Capital Fund regime together with proposals to counter the risk of greenwashing should be welcomed.

“In 2018, the Commission launched the Guernsey Green Fund which was the world’s first regulated green investment fund regime.  The proposal to introduce a Natural Capital Fund reinforces Guernsey’s position as one of the world’s leading sustainable finance centres.”

In order to be eligible for the Natural Capital Fund designation, funds will be required to set and monitor appropriate targets aligned with the Convention on Biological Diversity’s Post-2020 Global Biodiversity Framework’s 2030 Action Targets and relevant United Nations’ Sustainable Development Goals.

The required measurements relating to these targets and the controls around those measurements should give investors confidence that the Natural Capital Fund’s sustainable investment objectives align with investor expectations.

The proposed greenwashing guidance reinforces the Commission’s expectations relating to disclosure requirements and applies where explicit sustainability claims are made in an offering or promotion. GFSC Director General William Mason said the Commission is not aware of any greenwashing practices being undertaken by licensed Guernsey-based entities but added that it is important to continue guarding against the risk of greenwashing.

The Commission is consulting to keep the Bailiwick in step with other developed jurisdictions’ investor protection measures. This consultation paper also seeks views on future consideration of anti-greenwashing measures for other sectors beyond investment licensees and funds.

Mr Mason said, “In 2018, the Commission launched the Guernsey Green Fund creating what we believe was the world’s first regulated green investment fund.

“The Natural Capital Fund proposals and the accompanying measures to counter greenwashing are designed to allow the Bailiwick to continue to develop as a leading centre for sustainable finance. 

“We hope that Natural Capital Fund regime on which we are consulting may play a useful part in helping rebuild the planet’s stock of natural capital, enabling more businesses to work in harmony with nature.”

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