Natural Capital Fund Rules and Guidance, 2022 - Consolidated

Summary

These consolidated Rules and Guidance establish a voluntary designation regime, administered by the Guernsey Financial Services Commission, for collective investment schemes that wish to describe themselves as a Natural Capital Fund. A scheme must be registered or authorised under the Protection of Investors (Bailiwick of Guernsey) Law, 2020 and must meet specific objective-setting, target-setting, monitoring and disclosure requirements to obtain and retain the designation.

• Objectives: A designated scheme's objectives must spread risk and either make a positive contribution to, or significantly reduce harm to, the natural world, aligning with the UN Kunming-Montreal Global Biodiversity Framework, UN Sustainable Development Goals 12-15, or specified EU Taxonomy environmental objectives.
• Targets and monitoring: The governing body must set science-based natural capital targets relevant to the scheme's objectives, with a documented baseline, and review them at least every twelve months; appropriate policies, controls and metrics must be used to track and report progress at least annually.
• Application for designation: To be designated, the governing body must submit the relevant application forms, a final prospectus, a compliance declaration (Schedule 1 Part 1), a report on investment approach/targets/monitoring, any third-party verification certification, the required fee, and any further information the Commission requests.
• Use of designation and logo: Only schemes designated under these Rules may describe or promote themselves as a Natural Capital Fund or use the Natural Capital Fund logo (Schedule 2), subject to any conditions the Commission imposes.
• Oversight and breach reporting: The governing body must notify the designated administrator of any contravention of the Law or Rules; the administrator must escalate unresolved breaches to the Commission within one month and ensure investors are informed within two months if not rectified (subject to a limited exemption during the first six months after designation or until fully invested).
• Removal of designation: If non-compliance persists three months after identification, the administrator must file a declaration of non-compliance (Schedule 1 Part 2), instruct the scheme to stop using the designation and logo, notify investors, and publish the declaration prominently on the scheme's website; designation then ceases.
• Prospectus disclosures: Where a prospectus is prepared, it must disclose the Natural Capital Fund designation, the scheme's objectives, targets and investment criteria, how these will be met, and any material conflicts of interest.

The Rules took effect from their commencement date and were amended in 2023 to update the biodiversity framework reference; this consolidated version reflects those amendments but is stated to be a non-authoritative convenience copy.

Key obligations

• A scheme must not describe or promote itself as a Natural Capital Fund unless designated under the Rules.
• The governing body must set objectives aligned with specified international biodiversity/sustainability frameworks and document the criteria for spread of risk in the prospectus.
• The governing body must set natural capital targets that are science-based, documented, reference a baseline, and are reviewed at least every twelve months.
• The governing body must maintain a framework of policies, procedures and controls to monitor and measure performance against targets and review progress at least annually.
• An applicant governing body must submit to the Commission the application, final prospectus, compliance declaration, supporting report, any third-party certification, the requisite fee, and any other required information.
• The governing body must notify the designated administrator of any contravention of the Law or Rules.
• The designated administrator must escalate unresolved contraventions to the Commission within one month of identification and provide rectification proposals.
• The designated administrator must ensure investors are informed within two months of an unresolved contravention, or notify the Commission why this has not occurred.
• If a contravention remains unresolved after three months, the designated administrator must submit a declaration of non-compliance to the Commission, instruct cessation of the designation and logo use, notify investors, and publish the declaration on the scheme's website.
• A designated administrator wishing to continue using the Natural Capital Fund designation during wind-up must notify and seek the Commission's approval.
• Where a prospectus is prepared for a designated scheme, it must disclose the designation, objectives, targets, investment criteria, how targets will be met, and material conflicts of interest.
• The Natural Capital Fund logo must be reproduced only from original Commission artwork in accordance with the Brand Guidelines and must not be used misleadingly.
• Use of the Natural Capital Fund logo must cease as soon as possible after removal of designation.

Applies to

collective investment schemes, governing bodies of schemes, designated administrators, managers, designated custodians

Deadlines

• not less than once every twelve months: Governing body must review natural capital targets.
• at least annually: Governing body must review progress against targets.
• within one month of identifying a contravention: Designated administrator must notify the Commission and provide rectification proposals if the position has not been rectified.
• within two months of identifying a contravention: Designated administrator must ensure investors are informed, or notify the Commission that this has not occurred and why.
• three months from date contravention identified: If non-compliance continues, designated administrator must issue a declaration of non-compliance and cease use of the Natural Capital Fund designation.
• first six months from date of designation, or until fully invested (whichever first): Exemption period during which the standard breach-escalation timeline (rule 2.5(3)) does not apply.

Related documents

• This document is made under Protection of Investors (Bailiwick of Guernsey) Law, 2020