Rebecca Booth, a Carey Client Director, recently attended WE ARE GUERNSEY’s Sustainable Finance Week, which explored the themes of biodiversity, the energy transition and carbon markets.
Rebecca is a member of Guernsey’s Finance’s Green Strategy Group and keeps a close eye on how sustainable finance strategies are evolving and becoming increasingly integrated into the world of private finance.
Here she reflects on some of the stand-out themes from last week’s event.
Day one - biodiversity
During the three days, we heard from some excellent speakers and panellists, and I particularly enjoyed listening to Emma Howard Boyd, Chair of the UK Environmental Agency. She reminded us of David Attenborough’s speech ahead of COP26. He said that nature’s systems are collapsing, and anything built on those foundations is now on shaky ground.
That set the stage for the session’s discussions on biodiversity, and there is an awful lot that we need to do. There's a $4 trillion funding gap in what is needed to protect global biodiversity. Later, Ollie Hughes from Gresham House advised that there's a large amount of capital actually available to deploy into forestry but the financial reasoning in putting that capital to work needs to be reviewed ahead of investment and, currently, it’s hard to find investible assets.
However, it was very positive to hear that Gresham House assigns 30% of the land they have acquired for biodiversity; I thought that showed a good balance between a focus on returns and biodiversity recovery.
I've long felt that the TNFD Nature-Related Risk & Opportunity Management and Disclosure Framework, which is just in its very beginning stages, is fundamental to supporting investment in biodiversity.
I was very interested to hear about the inclusion of biodiversity in building developments as a criterion for UK planning consent. Emma Toovey, Environment Bank Ecology Director, talked about the requirement for a 10% uplift in biodiversity within building projects, which in turn often has a positive impact on the local community and its wellness. This is a concept that other regions could consider as well, no doubt learning from this UK initiative.
Another highlight of the first day of Sustainable Finance Week was hearing from Guernsey’s regulator, the Guernsey Financial Services Commission (GFSC), who announced the new Natural Capital Fund Regime. This provides environmentally conscious investors with assurance that their capital is deployed in efforts to promote the protection and recovery of the Earth's natural environment.
The GFSC also announced the expansion of the green assessment criteria in the Guernsey Green Fund regime to include the EU Taxonomy for Sustainable Activities’ technical screening criteria for activities contributing to climate change mitigation and adaptation.
Thirdly, the Commission has also published anti-greenwashing guidance for the investment sector to ensure that adequate disclosures are made to investors in respect of any environmental sustainability claims made.
This trio of announcements clearly demonstrates Guernsey’s leading position in sustainable finance and the regulator’s ability to apply solutions which are innovative and forward thinking.
The regulator continues to keep a close eye on how regulated entities are tackling climate-related risk and opportunities and clarified how the revised corporate governance code including climate risk can be tackled and reviewed as part of their business reviews.
With the International Sustainability Standards Board meeting in Frankfurt last week to discuss responses to their consultation on reporting standardisation, William advised they will be following these developments very closely. So we will wait to hear Guernsey’s response.
Day two – energy transition
The first thing that struck me about Adam Matthews is how few people there are in his role. As Chief Responsible Investment Officer of the Church of England Pensions Board, Adam works alongside the Chief Investment Officer to deliver the Board's objective to be a leading responsible and ethical pension fund serving its 41,000 members, and his speech highlighted a number of incredibly important points.
Firstly, how collaboration is critical for our collective pathway to net zero. Secondly, he illustrated the power of collective investor influence. Thirdly, he was very clear that the transition to net zero is really difficult and challenging, but we must not shy away from it; indeed, we need to stay invested in so-called ‘brown’ industries and influence and support their transition to a greener future. Adam reminded us that we all have a part to play.
Ross Keeling of HSBC suggested that in the future, companies without a net zero policy could become unbankable. A very positive message that net zero is important for all businesses.
We also must not forget, and the panel session reminded us all, that as consumers we have the ability to influence companies to achieve their net zero commitments. That theme was continued on day three of Sustainable Finance Week which looked at the carbon markets.
Day 3 – carbon markets
I learnt a lot about the burgeoning carbon offsetting and carbon markets and was immediately interested to hear that the market will multiply 15 to 20 times in the next few years. However, there's still a need for regulation and standards around it. It's still early days and the imminent launch of the London Stock Exchange’s Voluntary Carbon Market will be an important landmark in this fast-developing sector.
One main point was that as companies are trying to apply their net zero pathway and decarbonise their business or investment portfolios, by 2030 there's going to be a really high spike in demand for carbon credits and a chronic shortage of them.
So, whilst the focus needs to be on transition strategies and net zero implementation, attention must be given to buying offsets now.
Another stand-out message for me was the need for transparency and accountability to build trust in the carbon market. That will come from more rigorous and consistent standards, accountability and a clear chain of custody in the carbon offset supply chain.
The source of offsets, afforestation or carbon sequestration projects is often very distant from the people who are buying the credits; there is a duty of care to the environments and the societies where these projects are taking place.
Arts for Guernsey
Running alongside the three days of expert speakers, WE ARE GUERNSEY also used art to drive home the climate change message with an artist in residence from the Eden Project producing music from plant sound waves and local artists responding to Sustainability in Guernsey. Artists often look to nature for inspiration, and the environment and nature are close to our hearts. The more we use different media to demonstrate the plight of nature and why sustainable finance is important, the stronger the message we can deliver, and the more action we'll get.
Photographs taken by Chris George and Guernsey Finance.