Review of the Guernsey Green Fund Regime - Thematic Review 2020-2021

Summary

This is a thematic review report published by the Guernsey Financial Services Commission summarising findings from its 2020-2021 review of the Guernsey Green Fund (GGF) regime. It assesses how existing Guernsey Green Funds and their Designated Administrators comply with the Guernsey Green Fund Rules, 2018, and sets out expectations, observations and proposed future changes rather than new binding rules.

• Population and focus: The seven current Guernsey Green Funds are concentrated in renewable energy and agriculture, forestry and land-use categories under the Common Principles for Climate Mitigation Finance Tracking.
• Expertise gap: Green investment knowledge and expertise remain clustered in small pockets of industry, and firms will need to ensure staff are appropriately trained as environmental risk grows.
• Certification variation: The level of assessment carried out for Route 1 and Route 2 certification varied by asset complexity, investor base and verifying party.
• Administrator oversight: Designated Administrators' approaches to ongoing monitoring varied, and where oversight did not meet the Commission's expectations, risk mitigation programmes are being imposed on those firms.
• Proposed rule amendments: The Commission is considering amending the GGF Rules to allow quarterly (rather than monthly) monitoring for closed ended funds, and to permit prospectus green disclosures via recognised stock exchange announcements; these are being consulted on via a companion Spring Green Consultation Paper.

What licensees should do

• Continue to document how ongoing oversight obligations are fulfilled to maintain a good audit trail.
• Ensure appropriate reporting and monitoring arrangements are in place to fulfil oversight requirements.
• Consider whether staff have access to training and knowledge relevant to the Guernsey Green Fund regime.
• Continue to consider whether administered schemes should seek Guernsey Green Fund accreditation.
• Consider environmental risks to the business on an ongoing basis.

The report also restates existing GGF Rules obligations as context: Designated Administrators must monitor a fund against notified green and investment criteria monthly (currently), and provide annual confirmation of compliance to the Commission within six months of the fund's accounting year end, as well as to investors annually. No new mandatory deadlines are introduced by this report itself; proposed rule changes are subject to a separate consultation.

Key obligations

• Designated Administrators must ensure a Guernsey Green Fund is monitored against the notified green criteria and investment criteria on a monthly basis under the existing GGF Rules
• Designated Administrators must provide annual confirmation of GGF Rules compliance to the Commission within six months of the fund's accounting year end
• Designated Administrators must provide annual confirmation of compliance to investors on an annual basis
• Licensees should document how ongoing oversight obligations are fulfilled to maintain an audit trail
• Licensees should ensure appropriate reporting and monitoring arrangements are in place to enable oversight requirements to be fulfilled
• Firms subject to Commission-imposed risk mitigation programmes (following the review) must address identified oversight and impact-assessment shortcomings

Applies to

Guernsey Green Funds, Designated Administrators, fund and general partner boards of accredited funds, licensees within the Guernsey Green Fund regime

Deadlines

• within six months of the fund's accounting year-end: Annual confirmation of compliance with the GGF Rules must be provided to the Commission
• monthly: Existing requirement for Designated Administrators to monitor the fund against notified green criteria and investment criteria (proposed to be relaxed to quarterly for closed ended funds via a forthcoming consultation)