Key findings of the Commissions thematic review of the Guernsey Green Fund Regime
In introducing its review, the Commission noted that, whilst there are some administrative areas where there is room for improvement, Guernsey Green Funds appear to be being invested properly in appropriate assets. Some individual firms are being provided with feedback on areas where their green fund administration practices should be enhanced. The Commission is keen to ensure that consumers and professional investors are able to take advantage of opportunities to invest in genuinely green assets and that so called “greenwashing” does not occur in the Bailiwick.
The five key findings of the Commission are:
1. Composition of the population of Guernsey Green Funds
The current green fund population investment strategy is focused on renewable energy and agriculture. The current financial system is shifting from a short-term to a long-term bias, due to the increased awareness of green issues. The review also notes that the fundamental characteristics of green investment is that decision-making needs to focus on long-term outcomes and not just the short-term goal of returns for stakeholders.
2. Green expertise within the Bailiwick (and beyond)
The Commission notes that there is a growing ‘eco-system’ of expertise and knowledge on the island, which is predominantly outside of Designated Administrators. The review emphasises that staff need to have a basic understanding of green investments to ensure that they can fulfil their responsibility to monitor a green fund against the notified green criteria and investment criteria.
3. Compliance with the Guernsey Green Fund Rules
The Designated Administrator must document consideration of the skills, experience and independence of the Route 1 third party provider in order to ensure that compliance with the application form declarations can be demonstrated. If a green fund makes investments, into categories of green criteria other than those stated at application stage, the Designated Administrator must make a notification to the Commission and any internal monitoring schedule should be updated to reflect the additional criteria. The additional level of independent verification provided by Route 1 is seen as beneficial by some promoters, particularly when the fund holds a variety of green investments rather than just being single focus.
4. Benefits of accreditation
The review also notes that accreditation helps from a marketing perspective and it provides assurance on the integrity and credibility of the product to investors.
5. Awareness and demand of green investments
Support for green initiatives is strong in the Bailiwick and expertise is clustered in small pockets however, more awareness is still needed.
The findings of the thematic review should prompt licensees should check their policies, procedures and controls to ensure they meet the Commission’s expectations. Should any licensee have any questions or require further information please contact Aspida at Compliance@aspidagroup.com
Aspida’s comments following the statement issued on 26 February 2021 by FATF adding the Cayman Islands to its list of jurisdictions under increased monitoring