How Jersey is supporting a future built on sustainable finance

September 22, 2021

There is no stopping the march toward a greener, more inclusive economy. It is evident that investors are no longer focused solely on returns, and the international wealth management industry has needed to respond swiftly to meet the growing demand for portfolios that reflect purpose. We have truly entered the era where increasing numbers seek investments that provide both financial returns alongside positive environmental, social or governance (ESG) impact.

While the landscape for financial services continues to be reshaped by the rise of sustainable finance, where does that leave the leading international finance centres (IFCs)? Those with the foresight to have put in place the right frameworks and a commitment to nurturing the right environment for sustainable finance will be the ones that most readily capture the opportunities.

Sharpening Jersey’s competitive edge

‘Jersey is well positioned,’ explains Kay McCarthy, Head of Jersey Office at The International Stock Exchange (TISE). ‘As a jurisdiction, we have been providing a range of sustainable financial products and services for many years and they are now gaining wider prominence among intermediaries and clients. The island is also nimble, which means that we can quickly adapt to this growing interest in sustainable finance.’

Jersey also has the ingredients in place to sharpen its competitive edge. However, Amy King, Senior Manager at Jersey‑based KIT Consulting, acknowledges that the industry is still in the education phase, with firms and talent amassing the knowledge and sourcing the skills required to deliver best practice.

‘To get an edge, we need to be more innovative and think about ways to consolidate the number of proprietary and bespoke ESG assessment methods being used,’ says King. ‘We also need to continue upskilling and specialising in particular areas of sustainable finance, such as ESG fund administration and reporting.’

KIT Consulting has established #BuildBackBetter, a year‑long interactive programme of sustainable finance training for 30 of the industry’s rising talents.

‘We want to inspire the next generation of Jersey’s sustainable finance leaders. As the managers and administrators of billions in global wealth, we have both an opportunity and a responsibility to build back better from the pandemic and channel this capital into sustainable, ESG‑positive outcomes,’ says King. 

ESG gaining momentum

These developments are taking place alongside increasing pressure from investors keen to discuss the rationale for their investments with their boards, leadership teams and advisors.

McCarthy says that the trend of applying ESG criteria to the investment process is gaining momentum among high‑net‑worth (HNW) individuals. An increasing number have adopted ESG and socially responsible investing strategies, a trend that will only accelerate.

‘ESG integration and impact investing are already core elements in investment strategies across family offices and will continue as a conduit for the next generations as they align their investments with their own personal values,’ McCarthy adds. ‘This means opportunities will continue to be presented for the emergence of new and innovative ESG strategies in the future.’

Firms and organisations working in the private wealth space must not only be mindful of this investor commitment, but also implement methodologies that measure and evaluate investments through an ESG lens. McCarthy outlines how TISE is responding to this: ‘We have established our sustainable market segment with qualifying criteria where issuers and securities must have a third‑party assessment against a recognised framework or standard. This not only mitigates against the potential for mislabelling and greenwashing, but also rewards those positively assessed issuers and securities with enhanced connectivity, credibility, transparency and visibility among investors.’

For those HNW individuals and families keen to ensure that they meet ESG goals, the team at KIT Consulting suggest that they should start by considering and creating a core ESG investment philosophy and documented policy.

‘The policy should include a stewardship strategy for active engagement with investee companies to achieve desired outcomes; and identify the criteria against which investors will choose their asset managers. Investors should also educate themselves about the types of reporting and data available to quantify and illustrate the impact of their investments and seek out these reports from managers on a regular basis,’ explains Dr Emiko Caerlewy‑Smith, founder and CEO of KIT Consulting. 

Symbiotic convergence

In Jersey, firms have already started to integrate ESG standards into their business models and adapt their client offering to respond to changing demands. There has also been an emergence of a number of large Jersey‑based alternative fund structures deploying much‑needed capital into areas such as renewable energy.

Greater symbiotic convergence and integration between Jersey’s burgeoning fintech and sustainable finance sectors is also noticeable. It is leading to a number of service providers, supported by the expertise of the fintech companies, developing new tools that deploy the latest IT innovations to collect, evaluate and report ESG data.

However, to build on this, Jersey has recognised that, prompted by emerging regulation and a greater appreciation of the need for standardisation in evaluating ESG credentials and performance, a formal, robust framework is desirable. In response and as a guiding platform for the future, Jersey has launched a 2030 vision for sustainable finance, a strategy designed to position the jurisdiction as a leading IFC in this arena.

That strategy will allow Jersey to build on the foundations it has in place and will help coordinate its financial, regulatory and technological offerings to enable clients to make investments that align with their economic, environmental and social values.

King reflects that the focus should be on providing the industry with the knowledge and skills to build sustainable financial services companies at a firm level and to get innovative in the creation of ESG products and services.

‘Everything starts with education, knowledge and skills,’ she says. ‘A survey to understand the status of ESG appetite and perceived barriers would be another good first step, so transformational efforts can be targeted accordingly.’

Remaining relevant

Elliott Refson, Head of Funds at Jersey Finance, highlights a sustainable finance scheme targeted at the funds sector. ‘Through the launch of the Jersey Fund for a Wilder World, Jersey practitioners who have earned fees from sustainable finance workflows can donate a portion to the fund, which will then be applied by conservation body Durrell to support its rewilding sites. This scheme adds to Jersey’s existing sustainable finance credentials for providers in the funds sector looking for options to suit the ESG objectives of their investors.’

Meanwhile, recognising the direction of travel, TISE has established TISE Sustainable, a market segment that forms part of Jersey’s sustainable finance offering to a global audience. Several global issuers have already been admitted to the segment.

‘It provides qualifying issuers and securities with enhanced visibility among investors and, as such, is an enabler for the flow of capital into investments that promote ESG activities,’ says McCarthy.

It is important that the island continues to monitor wider developments in the provision of sustainable finance products to ensure that its offering remains relevant for clients, adds McCarthy. ‘In doing so, we will also ensure that we maintain and develop on‑island expertise and knowledge in this specialist and fast‑maturing sector.’

About the Author

David Postlethwaite

Sustainable Finance Lead at Jersey Finance

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