Jersey – an ESG focussed international finance centre

By An Kelles, Director - GCC, Jersey Finance Limited

?If there is one near certainty about the financial markets in the Gulf, it is the inescapable rise of ESG investing.

?While looking at the wider global picture, ESG assets are forecast to exceed US$100 trillion by 2028* and US$150 US trillion by 2034 and already one in every three US Dollars currently invested takes account of ESG factors**.

?Studies show that the Gulf wealth management community, especially the next generation, have embraced the move in that direction, a trend supported by findings in a recent global wealth management survey conducted in May this year by UBS in which 78% of respondents among wealthy investors in the UAE declared that they wanted to make a difference and 48% were more interested in sustainable investing as a result of the Covid-19 epidemic.

?Furthermore, in our own research in association with Hubbis*** it was revealed that socially responsible investing and products offering ESG standards are driving the increased demand for Islamic wealth solutions. It is pertinent to note that the convergence of interest in the objectives of Shariah compliant financing and ESG focused investments is an ideal fit for Jersey which has deep expertise and experience in both these sectors and for such investments globally.

?While the links between the Middle East and Jersey have traditionally been strong through private wealth structuring, there is a trend for more of these families to set up their own alternative funds and with Jersey’s existing strengths, there has been a natural gravitation for fund managers across the Gulf to turn to Jersey as a domicile for alternative investment funds.

Gulf investors are not unlike their counterparts elsewhere in that regard. They want to see clear policy and procedures in place from their managers and domiciles and robust regulation coupled with good underlying governance.

?We all appreciate that while sustainable finance has become a strategic priority in recent years, the impact of COVID-19 has placed environmental, social and governance thinking into sharper focus.

?Where does this acceleration and shifting priorities leave an international finance centre (IFC) such as Jersey where economic and political stability, a robust yet flexible regulatory framework and an armoury of tailormade legal structures, is already proving attractive to an increasing number of Gulf based investors.

?Our response has been to launch a new sustainability strategy this year which places collaboration, communication and upskilling at the heart of the plan and will help position Jersey as the leading IFC for sustainable finance. The intention is to build partnerships with stakeholders, to integrate sustainability across sectors, to enhance collaboration, implement independent performance measurements and to make investment in the depth of skills needed even more of a priority to help in meeting changing investor strategies.

?That strategy allows us to build on the foundations we have in place and will co-ordinate around leveraging all we have to offer in terms of our financial expertise, the regulatory infrastructure and technological advances that we can deploy to enable us to offer clients a complete set of solutions to enable them to make investments that align with their economic, environmental and social values.

?As ESG priorities accelerate, investors will have mounting concerns about the dangers of green washing and will want reassurance about how their investments are deployed. Jersey service providers, working with the digital industry, are developing the measurement and analysis tools necessary which will provide investors with the confidence they seek.

?Furthermore, Jersey’s financial regulator, the Jersey Financial Services Commission recently made changes to a number of its Codes of Practice (Certified funds and Funds service business) and the Jersey Private Fund (JPF) Guide***, following feedback received during its sustainable investments consultation, with the aim to counteract the potential for greenwashing by supporting sustainable finance through a commercially viable disclosure regime. ?

Jersey, with a reputation predicated on 60 years’ experience in financial services, has a responsibility to leverage its expertise and capital to support the transition to an environmentally and socially sustainable global economy and it intends to do so, working together with partners to support the growth of sustainable finance and its contribution to environmental and social change.

?Investors in the Gulf can be reassured that as they grasp the opportunities in the ESG arena, they can rely on the commitment of Jersey to the cause and the experience of the Jersey service providers, to help them meet their strategic ambitions.

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*Deutsche Bank and GSIA

** Forum for Sustainable and Responsible Investment (2020)

*** “The Evolution of Wealth Management in the World of Islamic Finance - Views from the Islamic Finance Wealth Management Community”, commissioned by Jersey Finance and Hubbis.

**** Jersey Financial Services Commission: Sustainable investments consultation leads to Codes of Practice and Jersey Private Fund Guide changes https://www.jerseyfsc.org/news-and-events/sustainable-investments-consultation-leads-to-codes-of-practice-and-jersey-private-fund-guide-changes/

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