GFSC looks to counter risk of ‘greenwashing’

GUERNSEY is set to introduce a second category of sustainable investment fund to build on the success of the Guernsey Green Fund and further enhance the island’s reputation in the sector.

Gardeners are being encouraged to let weeds and wildflowers bloom for International Biodiversity Day (30841670)
Gardeners are being encouraged to let weeds and wildflowers bloom for International Biodiversity Day (30841670)

The Guernsey Financial Services Commission is consulting on the introduction of a Natural Capital Fund regime and also bringing forward proposals to counter the risk of ‘greenwashing’.

The Natural Capital Fund designation should complement the Bailiwick’s existing regime, creating a new designation for funds that are committed to making nature-positive investments. The commission said the two fund classes would provide Guernsey funds ‘with a choice of complementary sustainability designations, based on international standards’.

To be eligible, 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 the relevant United Nations’ Sustainable Development Goals.

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

‘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,’ said GFSC director-general William Mason.

‘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.’

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

The guidance will reinforce the commission’s expectations relating to disclosure requirements and applies where explicit sustainability claims are made in an offering or promotion.

The commission said it was not aware of any greenwashing practices being undertaken by locally-licensed entities, but it was important to guard against, and the island needed to keep in step with investor protection measures in other developed jurisdictions.

The consultation also looks at future consideration of anti-greenwashing measures for other sectors beyond investment licensees and funds.

The regulatory developments are part of the GFSC’s involvement with the Network for Greening the Financial System and its commitments made at COP26 in Glasgow.

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