Guernsey proposes world’s first ‘natural capital fund’ regime

The Guernsey Financial Services Commission (GFSC) published a consultation paper on 6 May proposing the introduction of a new Natural Capital Fund regime to help channel investment into biodiversity and natural capital projects.

It would complement the existing regulated Guernsey Green Fund regime, which was introduced in 2018 and now channels more than £4.4 billion into green investments. Both regimes are designed to provide Guernsey funds with a choice of complementary sustainability designations based on international standards.

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 are intended to give investors’ confidence that the Natural Capital Fund’s sustainable investment objectives align with investor expectations.

A second Consultation Paper issued by the GFSC seeks to enhance levels of confidence in Guernsey’s sustainability framework by introducing measures that help mitigate the potential risk of ‘greenwashing’. The proposed guidance reinforces the GFSC’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 was not aware of any greenwashing practices being undertaken by licensed Guernsey-based entities but said it was important to continue guarding against the risk of greenwashing.

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

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

On 26 May, the GFSC announced that it had been accepted for membership of the Taskforce on Nature-related Financial Disclosure (TNFD). Formally launched in June 2021, the TNFD is a global, market-led initiative established in response to the growing call to factor nature-related risks into financial and business decisions.

To address this need, the TNFD is developing an integrated risk management and disclosure framework for organisations to report and act on evolving nature-related risks and opportunities. After four rounds of beta versions, the TNFD plans to release its final recommendations for the Framework in September 2023.

The TNFD has been endorsed by the G7 Finance Ministers, G20 Sustainable Roadmap, and international leaders, including UN Secretary General António Guterres, French President Emmanuel Macron, UK Prime Minister Boris Johnson and UN Special Envoy on Climate Action & Finance Mark Carney.

The GFSC said being a member of the TNFD Forum would help it to gain greater insights into global developments within nature finance and ensure an enabling framework in Guernsey for firms that wish to be become more active in sustainable finance.

“The GFSC is already a member of the Sustainable Insurance Forum and the Network for Greening the Financial System, so this is another step on an exciting journey to Guernsey leading as a force for global good,” said Guernsey Finance Head of Sustainable Finance Stephanie Glover.

“Guernsey is not just talking about this; it is demonstrating its commitment to the cause by collaboration with key stakeholders in the goal of mitigating climate change and shifting global financial flows away from nature-negative outcomes toward nature-positive outcomes.”

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