Sustainable Finance and reporting – considering Guernsey’s approach
The Bailiwick of Guernsey is both a leading international finance centre and a group of islands. It is therefore not just engaged but directly invested in sustainability and climate change – you can read the
States of Guernsey commitment to ensuring a more sustainable and resilient future.
For the Commission’s part, we have already taken some important steps in this space, including two world firsts: the Guernsey Green Fund regime, which launched in 2018; and the green insurance capital regime for life insurers having come into effect in December 2020. The Commission has also:
- amended the Code of Corporate Governance in June 2021, introducing a requirement for Boards to consider the impact of climate change on their strategy and risk profile and where they consider it appropriate, make climate change related disclosures;
- published a sustainability report as part of our Annual Report since 2021;
- launched the Nature Capital Fund regime in 2022; and
- issued guidance on anti-greenwashing to the Funds and Investment sector in September 2022, following a consultation on proposed measures to counter the risks of greenwashing earlier that year.
Globally, a number of regulatory standards, designed to protect the environment, have been developed over the past 15 years. In 2015, the Task Force on Climate-Related Financial Disclosures (TCFD) was the first real attempt to standardise worldwide climate-related financial disclosure.
The TCFD fulfilled its remit, disbanded and formally passed the baton to the International Sustainability Standard Board (ISSB) in October 2023 – an independent body within the International Financial Reporting Standard Foundation (IFRS Foundation). ISSB builds on climate reporting expectations, but also introduces the wider concept of sustainability reporting and has been endorsed by all the major standard-setting bodies.
The standards focus on meeting the needs of investors and financial markets, seeking disclosure of material information and sustainability-related risks and opportunities that could reasonably be expected to affect investment prospects.
The Commission is very conscious there is a large degree of political uncertainty around the pace and scope of global adoption of sustainability initiatives and that Guernsey, as an international finance centre, is well placed to recognise this isn’t a ‘one size fits all’ scenario. However, we do consider we are likely to see an increased focus on sustainability risks and opportunities, and firms that want a long-term future (including providing services to non-Guernsey financial institutions) should be ready to explain their approach to sustainability and climate change.
Why is this important?
It is clear that the world faces a significant challenge if it is to meet the targets set in the Paris Agreement (extended to Guernsey by the States in 2023) to limit the increase in average temperatures to 1.5C above pre-industrial levels.
The global finance industry has a significant part to play in delivering against the Paris targets, as economies seek to de-carbonise, reduce their emissions and use existing and emerging technologies in the effort to reduce global warming. This all takes capital.
Reliable sustainability reporting provides market participants with the necessary information to understand risks, to invest and to allow markets to function efficiently. Essentially, good disclosure leads to informed decisions.
Equally, whilst we are still in the foothills of global adoption of ISSB, not taking it seriously is likely to be noted internationally and to have a negative impact on a jurisdiction’s credibility with other actors, especially multi-national corporates subject to home jurisdiction pressure to move towards net-zero carbon emissions.
What has the Commission issued today?
As previously mentioned in the first edition of The Leopard, we are launching a discussion paper on the subject of future sustainability reporting, with the aim to:
- increase awareness in the Bailiwick’s financial sector of international developments in sustainability reporting standards;
- seek views from industry on the likely impact of these developments and the approach to implementation of ISSB Standards in the Bailiwick;
- gather information on current sustainability reporting practices;
- seek views on possible strengthening of anti-greenwashing provisions applicable to regulated entities; and
- seek views on enhancing the governance obligations of licensees to manage environmental sustainability risks.
We are clear on the need for a proportionate approach, and advance for discussion that, for the Bailiwick, good looks like:
- being recognised internationally as a centre for sustainable finance;
- applying international standards proportionately and consistently with reputable peer jurisdictions;
- being involved in raising and providing capital for local, regional and global projects supporting the transition to low carbon economies; and
- a venue that enables investors to make informed choices.
The discussion paper is available now on the
Consultation Hub. Responses are sought by 25 October 2024.
Gillian BrowningCo-Deputy Director General, Investment, Fiduciary and Pension Division
