Consultation on Proposals to Develop a Guernsey Green Fund (April 2018)

Summary

This is a 2018 GFSC consultation paper seeking industry feedback on proposed rules to create a new fund designation, the Guernsey Green Fund (GGF), for collective investment schemes that invest with the aim of mitigating climate change. It sets out draft Guernsey Green Fund Rules 2018 and asks 13 consultation questions on the proposed framework; it is not yet in force and requirements described are proposals only.

• Designation and levels: An authorised or registered collective investment scheme could be designated a Guernsey Green Fund at Level 1 (third party certified) or Level 2 (self declared by Manager or Designated Administrator), provided it meets green criteria in draft Schedule 2.
• Investment criteria: At least 75% of a GGF's assets by value would need to meet the green criteria, with the remaining 25% not permitted to undermine the climate mitigation objective or fall within excluded activities in draft Schedule 3.
• Application and disclosure: Designated Administrators would submit application forms, the final Prospectus, a Schedule 1 declaration (Level 1 or Level 2), confirmation on ESG Principles adoption, and the prescribed fee; the Prospectus would need specified green fund disclosures.
• Ongoing oversight and breach handling: Designated Administrators would monitor the fund against the green criteria monthly, notify the Commission and investors if breaches are not rectified within set periods, and the Commission could remove the GGF designation for continued non-compliance.
• Reporting: Designated Administrators would file Form 143 within six months of the fund's accounting year end and ensure annual reporting to investors on how the green criteria are met.

Because this is a consultation on draft rules, none of the obligations described are yet legally binding; they reflect the Commission's proposals and are subject to change following industry feedback before any final rules are made.

Key obligations

• Under the proposed rules, a Designated Administrator would submit an application (forms, final Prospectus, Schedule 1 declaration, ESG confirmation, fee) to obtain the Guernsey Green Fund designation
• A GGF would need to maintain at least 75% of assets by value meeting the green criteria and ensure the remaining 25% does not undermine the climate objective or fall within excluded activities
• The Designated Administrator would need to monitor adherence to the green criteria on a monthly basis and notify the Commission and provide rectification proposals if a breach is not fixed within one month
• If a breach persists beyond three months, the licensee who submitted the declaration would need to file a declaration of non-compliance, cease using the GGF designation, notify investors, and post the declaration on the fund's website
• The Designated Administrator would need to file Form 143 with the Commission within six months of the fund's accounting year end detailing compliance with the green criteria
• The Designated Administrator would need to give immediate written notice to the Commission of any material change to the Prospectus disclosures required under the green fund rules, and ensure investors are notified

Applies to

collective investment schemes (authorised and registered schemes), designated administrators, fund managers licensed under the Protection of Investors Law, custodians, controllers (directors, general partners, trustees) of schemes, licensees under the Protection of Investors (Bailiwick of Guernsey) Law

Deadlines

• within one month of the date the contravention was identified: Designated Administrator must notify the Commission and provide rectification proposals if a green criteria breach is not resolved
• within six months of the Guernsey Green Fund's accounting year end: Designated Administrator must submit Form 143 detailing how the scheme has invested within the green criteria
• 3 months from the date the contravention was identified: If the fund still fails to meet the green criteria, the licensee must file a declaration of non-compliance, stop using the GGF designation, notify investors, and publish the declaration