By Amy Bryant, deputy chief executive of Jersey Finance
THERE is no doubt that the acceleration of sustainable finance and ESG investment has been one of the biggest trends of the past year across the institutional investment and private wealth spaces.
Bloomberg Intelligence estimates that the global total of assets under management in ESG-related funds is around US$41 trillion – up from US$22.8 trillion in 2016 – while it’s projected that ESG-related investments will surpass US$50 trillion by 2025.
This growth trajectory is not without its challenges, though. The outcomes of COP27 in Egypt in November last year, for instance, were somewhat muted, particularly after an energetic COP26 in Glasgow the year before, after which there was real optimism around countries’ commitments to work towards keeping temperature rises below a 1.5°C limit, in accordance with the 2015 Paris Agreement.
In tandem with this, recent months have also been characterised by the emergence of an alternative counter narrative in markets such as the US to the almost one-way direction of traffic we’ve become used to in the sustainable finance landscape.
We have also seen fund managers and financial institutions being called out for misleading greenlabelling and greenwashing; we’ve seen attacks on the quality of data; and we’ve seen confusion around the different regional disclosure and reporting regimes in the US, EU and UK.
Firms are also raising concerns around capacity issues and skills when it comes to the enormous efforts required to actually deliver on their ambitions. The feeling is that we have collectively reached
something of an inflexion point for the sustainable finance agenda. Having been through a period of objective and target setting, we are now moving into an implementation phase. For that to materialise, there are going to be challenges around integrity, measurement, trust and accountability. In some ways, these sorts of challenges are actually quite healthy for the ESG movement, providing an opportunity for good, open debate and progress.
Now the real work has to begin. The sustainable finance landscape is going through a critical phase of evolution as the industry grapples with the parameters and frameworks it needs to make sure the work it is doing is clear, unequivocal and meaningful.
Ambitions
The important thing is that we must not be afraid of these challenges, or lose our focus on sustainability. Jersey, as an agile IFC committed to the future evolution of sustainable finance, has both the opportunity and the desire to play a key and impactful role in navigating these issues.
We don’t shy away from our ambitions in this space. It is our vision, as set out in our long-term Jersey for Good strategy launched in 2021, that, by 2030, Jersey will be recognised by its clients, key stakeholders and other partners as the leading sustainable international finance centre in the markets it serves.
Maintaining our speed of progress as an IFC in this space is therefore absolutely crucial if we are to not only meet our own targets, but also meet the rapidly evolving needs of investors and institutions.
That was made clear at a meeting of the UN’s International Network of Financial Centres for Sustainability towards the end of last year, which Jersey Finance attended alongside some 40 other countries. At that meeting, a number of challenges for the development of sustainable finance were discussed, among them the availability of talent and skills within the sustainable finance sphere and the need to maintain trust in ESG.
It’s important for IFCs like Jersey to be part of these conversations. Mobilising capital and driving alignment to the Paris Agreement and UN’s Sustainable Development Goals at pace is key, and mobilising high-quality capital securely, safely, in a targeted way and in a neutral environment is exactly what Jersey does as an IFC.
That’s why, in realising its own sustainable finance strategy, Jersey Finance remains focused on collaborating with key partners at home and overseas, through networks like the FC4S, to maintain momentum.
Earlier this year, for instance, Jersey Finance undertook a full audit assessment of Jersey’s sustainable finance capabilities, the results of which will help focus our efforts on enhancing our efforts over the coming years.
We’re also working hard to create a first-class sustainable finance ecosystem, working with government and the financial services regulator to hone our regulatory environment, to create a robust framework that investors can have confidence in and that retains flexibility to cater for future innovation.
In addition, Jersey Finance is supporting an ESG skills programme, with significant numbers of our local workforce having made use of that over the past year and more continuing to do so.
It’s important to celebrate our own successes and strengths, too, and we’re doing that again through our second Sustainable Finance Awards later this year, building on the success of our inaugural awards last year.
As a forward-thinking jurisdiction, we are very clear that our own success as an IFC depends on our ability to integrate sustainable finance into our proposition. It is not just a standalone project; it is something that underpins our integrity as an IFC. It’s an exciting and rapidly developing area of our industry.
More than that, we believe we have the potential, through our sustainable finance ambitions, to play a significant role on the global stage, working collaboratively with others to navigate challenges, build trust and maintain the positive momentum we have all worked hard to achieve so far.
