As the world rebuilds from the pandemic and as the focus on sustainable finance and environmental, social and governance (ESG) grows, Jersey’s finance industry has continued to assert its credentials in this space, promoting a culture of care for the climate and the environment.
By encouraging socially responsible investing, further integration of ESG criteria across business, finance and investment activities and increased cooperation between different sectors towards achieving the UN’s Sustainable Development Goals (SDGs), we have positioned ourselves firmly as a leader in the sustainable finance arena.
What is clear though, is that the sustainable finance landscape is evolving rapidly. As we develop more sophisticated means of understanding and implementing changes to promote sustainability, the opportunities and possibilities available to the industry for supporting ESG aims are becoming more diverse, advanced and accessible.
We are seeing rising numbers of clients who wish to shape their strategies around a sense of purpose relative to profit and returns, firms who are conscious of the need to embrace sustainability as part of their supply chain and new policies from governments to bring about urgent action on ESG issues. All of this requires sophisticated and specialist support and this is where Jersey is focusing its efforts.
PATHWAY TO SUCCESS
This awareness of sustainability has to a certain extent been heightened by the global recovery from the pandemic. For instance, pre-pandemic the annual financing gap for the UN’s
SDGs stood at US$2.5 trillion, whereas now it stands at US$4.2 trillion.
However, this was a trend that was already in motion, as was highlighted at COP26 last year. The need for collaborative efforts to meet this demand for capital was one of the key takeaways from that global event, where it was emphasised that it cannot only be government and institutional capital coming together to meet the gap but also private capital. That has significant implications for private client advisers, trustees and fiduciaries, as well as the investment fund community.
Within this global context of the significant growth of sustainable finance, Jersey holds a strong position – with the Government of Jersey having outlined its commitment for the Island to be carbon neutral by 2030, the efforts of Jersey as an IFC are bound up and aligned with the Island’s holistic vision more widely.
With our commitment to a sustainable future having been clear for some time, sustainable finance has likewise been a high priority. As a result of our forward-thinking approach, we have been able to forge a successful pathway, building upon the existing expertise that the Island’s workforce already had to offer.
Back in 2020, Jersey Finance undertook a significant piece of work to help the Island’s finance industry respond to the long-term risks and opportunities presented by the evolution of sustainable finance. The results informed a long-term strategic plan entitled ‘Jersey for Good: A Sustainable Future’, launched in early 2021.
At that time, Jersey was already facilitating billions of pounds of investment into impact and ESG funds. Firms had already started to integrate ESG standards into their business models and adapt their client offering to respond to changing demands and a number of large Jersey-based alternative fund structures were emerging, deploying much-needed capital into areas such as renewable energy.
However, we recognised the need for a formal, robust framework to help propel Jersey to the forefront of the sustainable finance arena. ‘Jersey for Good’ set out a vision and a number of objectives for where Jersey intends to be by 2030 and included an initial two-year ‘Pathway to Success’ to deliver on those objectives.
A vision was outlined that ‘by 2030, Jersey will be recognised by its clients, key stakeholders and other partners as the leading sustainable international finance centre in the markets it serves’.
Key recommendations were made in the report and plan to support this vision. These included prioritising cooperation on sustainability issues between the finance industry, the Jersey Financial Services Commission (JFSC), the Government of Jersey and the Island’s wider population and building strong stakeholder partnerships to ensure that each sector has access to the necessary tools for integrating sustainability within a joined-up policy framework.
OPPORTUNITIES AND INNOVATION
As an industry and as an organisation, we have been successful in implementing a number of the recommendations of that report over 2021/22, encouraging greater collaboration, focusing on communication and delivering on upskilling in relation to sustainable finance.
In particular, we have created a shared stakeholder governance structure for the strategy, with representatives from across the industry – as well as government and the JFSC – and we have collaborated with organisations beyond Jersey’s borders, with Jersey Finance obtaining membership of the UN-convened Network of Financial Centres for Sustainability (FC4S) and the JFSC joining the Network for Greening the Financial System (NGFS).
We have also established the first baseline stocktake of sustainable finance in Jersey, benchmarking the industry’s ability to deliver capital for the UN Sustainable Development Goals and undertaken a major skills mapping exercise to understand key skills gaps, subsequently working with the CISI to offer digitally delivered targeted upskilling opportunities.
In addition, we were able to support Jersey’s participation at COP26 and the process for extending the UK’s climate commitments under the Paris Agreement.
This success was highlighted during a sustainable finance week in early 2022, marking one year since the strategy was launched, where it was also noted that efforts to support our move towards a sustainable future are opening up opportunities and driving innovation in new ways too.
We have, for instance, seen greater collaboration between Jersey’s fintech and sustainable finance sectors. Several service providers have tailored their fund solutions to include new data-driven propositions and are developing new tools that deploy the latest technologies to collect, evaluate and report ESG data. These sustainable finance solutions are seeing strong take-up by fund managers, who are keen to meet both the growing investor demands for transparency on the impact of their portfolios and to streamline their regulatory compliance under emerging frameworks, such as the Sustainable Finance Disclosure Regulation.
New research undertaken by industry is also improving our understanding of sustainability issues. For instance, the recent PwC Green Jobs Barometer for the Channel Islands included a comparison of Jersey to London and other parts of the UK to paint a picture of the current status of the transition to a green economy across these areas. By developing our insight and knowledge surrounding sustainable practices and their implications for the economy, we can ensure that we are fully prepared to usher in a more sustainable future in a balanced and responsible manner.
In recognition of the efforts being made across the Island and innovation across the industry, this year we launched our inaugural Sustainable Finance Awards, designed to recognise and showcase the leading people and firms in Jersey’s sustainable finance ecosystem. We also added a new ‘Sustainability’ category to our Rising Stars Awards, which champion young local talent among early career finance professionals.
By celebrating leadership, innovation and individual contributions to sustainability within our IFC, we hope to encourage the Island’s continued commitment to operating sustainably and prioritising ESG values in the workplace.
LOOKING TO THE FUTURE
As sustainable finance continues to see global growth, leading IFCs that have worked proactively to put in place the appropriate frameworks and develop a vision for a more sustainable future will find themselves in the strongest position to make the most of opportunities and advance their offering in this space.
As a forward-thinking, future-focused jurisdiction, Jersey has laid the groundwork and invested in the knowledge, technology and skills of its industry which will allow it to be at the forefront of the sustainable finance revolution. We understand our responsibility to leverage our expertise and capital to support the transition to an environmentally and socially sustainable global economy and we continue to capitalise on our strengths to respond rapidly to developments in the industry to strengthen our impact as an IFC.