How do Jersey and other international financial centres reposition themselves within the financial inequality debate? We have become used to being the focus of media attention which persists in portraying offshore finance as a ‘shady’ enterprise with the sole purpose of further lining the pockets of the wealthy and depriving Governments of tax revenues.
There is no doubt that whilst global standards of living have increased over the past 40 years, wealth has become more concentrated in fewer hands. This concentration of wealth has widened the gap between the rich and poor and led to an increasing sense of financial injustice. Jersey and other international finance centres are seen to contribute to this inequality and have increasingly been the target of those who seek to address the issue. This, combined with the demand for transparency driven by the lack of trust, has resulted in continued press attention for international financial jurisdictions that are an easy target in any debate on the subject.
The assumption made by the media and by the finance industry has been that offshore does not equal social good. But can that perception be changed and can offshore become a force for good within a global economy?
Historically, we have often thought that this force for good came largely from private wealth and philanthropy. Philanthropy continues to be a positive force for change allowing families to direct funds to those causes that they feel most passionate about but the corporate and fund sectors also have a key role to play.
Jersey provides a tax neutral platform for global capital flows and therefore plays a key part in the global economy, facilitating investment flows to both developed and developing countries. Jersey has established itself as a well regulated, compliant financial jurisdiction; but what if Jersey goes beyond the fight against money laundering, financing of terrorism (AML/CFT) and preventing corruption, and actively seeks to ensure that the capital flows it enables are targeted for social good? This might be through funds to develop emerging economies, develop their infrastructure and education, or investing in infrastructure projects which will tackle climate change. Within the investment sphere, we have seen the rise of Environmental, Social, and Governance (ESG) factors over the past few years and the development of established matrices for measuring ESG; perhaps this could be extended to international finance centres and we could rate them not just on the basis of deficiencies and blacklists but on the basis of positive impact to the global economy.
The integrity of ESG offerings across the Crown dependencies is already being tested with Guernsey introducing Green Funds legislation and the Jersey Financial Services Commission issuing a consultation on enhancements to sustainable investments.
We have witnessed a rise in awareness and interest in socially responsible and impact investing within private wealth operations over the past five years. Families are taking a greater interest and a more active role in the broader purpose of their investments and the positive contribution they make. As trustees, we are finding that not only is the range of specific opportunities to invest with a conscience becoming much broader, it is now being brought within mainstream discretionary modelling.
At Oak, we have direct experience in the ESG field having provided administration and governance support to the Quinbrook Clean Energy Fund since its inception over five years ago. We have direct insight into the operation of the fund and the tight investment and monitoring controls it applies in order to ensure that the stated aims of the fund to invest in renewable energy sources and associated infrastructure are met. We have seen a rise in demand for investment from local government and pension funds who are seeking to meet their own ESG targets.
Perhaps now is the time to take a more proactive approach and for Jersey to join the financial equality debate with a clear vision for the future. As a key global financial jurisdiction, we play an active role and are seen as a key facilitator of capital flows with a positive global impact.