If there is one near certainty about the financial markets in China and the Far East, it is the inexorable rise of ESG investing.
While looking at the wider global picture, ESG assets are forecast to exceed US$100 trillion by 2028* and US$150 US trillion by 2034 and already one in every three US Dollars currently invested takes account of ESG factors**.
Studies*** show that the Asian wealth management community, especially the next generation, have embraced the move in that direction. Meanwhile, in the funds sector, asset managers are increasingly reviewing their products, domiciles and fund administration solutions in line with the critical success factors demanded by sustainable investing.
While the links between Asia and Jersey have traditionally been strong through private wealth structuring, there is a trend for more of these families to set up their own alternative funds and with Jersey’s existing strengths, there has been a natural gravitation for Asian fund managers to turn to Jersey as a domicile for alternative investment funds.
Far Eastern investors are not unlike their counterparts elsewhere. They want to see clear policy and procedures in place from their managers and domiciles and robust regulation coupled with good underlying governance.
We all appreciate that while sustainable finance has become a strategic priority in recent years, the impact of COVID-19 has placed environmental, social and governance thinking into sharper focus.
Where does this acceleration and shifting priorities leave an international finance centre (IFC) such as Jersey where economic and political stability, a robust yet flexible regulatory framework and an armoury of tailormade legal structures, is already proving attractive to an increasing number of Chinese and wider Far Eastern investors.
Our response has been to launch a new sustainability strategy this year which places collaboration, communication and upskilling at the heart of the plan and will help position Jersey as the leading international finance centre for sustainable finance. The intention is to build partnerships with stakeholders, to integrate sustainability across sectors, to enhance collaboration, implement independent performance measurements and to make investment in the depth of skills needed even more of a priority to help in meeting changing investor strategies.
That strategy allows us to build on the foundations we have in place and will co-ordinate around leveraging all we have to offer in terms of our financial expertise, the regulatory infrastructure and technological advances that we can deploy to enable us to offer clients a complete set of solutions to enable them to make investments that align with their economic, environmental and social values.
As ESG priorities accelerate, investors will have mounting concerns about the dangers of green washing and will want reassurance about how their investments are deployed. Jersey service providers, working with the digital industry, are developing the measurement and analysis tools necessary which will provide investors with the confidence they seek.
Furthermore, Jersey’s financial regulator, the Jersey Financial Services Commission recently made changes to a number of its Codes of Practice (Certified funds and Funds service business) and the Jersey Private Fund (JPF) Guide***, following feedback received during its sustainable investments consultation, with the aim to counteract the potential for greenwashing by supporting sustainable finance through a commercially viable disclosure regime.
As Jersey Finance chief executive officer, Joe Moynihan, recently commented:
‘Jersey, with a reputation predicated on 60 years’ experience in financial services, has a responsibility to leverage its expertise and capital to support the transition to an environmentally and socially sustainable global economy and it intends to do so, working together with partners to support the growth of sustainable finance and its contribution to environmental and social change.’
Investors in China and the wider Far Eastern region can be reassured that as they grasp the opportunities in the ESG arena, they can rely on the commitment of Jersey to the cause and the experience of the Jersey service providers, to help them meet their strategic ambitions.
*Deutchse Bank and GSIA
** Forum for Sustainable and Responsible Investment (2020)
*** In research Jersey Finance conducted last year in association with the Asian financial publisher Hubbis*** 69% of respondents indicated that between a quarter and three quarters of the NextGen financial investment portfolios will be centred on ethical, impactful or ESG investments.
*** Jersey Financial Services Commission: Sustainable investments consultation leads to Codes of Practice and Jersey Private Fund Guide changes https://www.jerseyfsc.org/news-and-events/sustainable-investments-consultation-leads-to-codes-of-practice-and-jersey-private-fund-guide-changes/
This article was first published in the British Chamber of Commerce, Shanghai’s July 2021 Newsletter.