New disclosure rules for Jersey sustainable investments
The Funds and Investment Business industry in Jersey needs to get ready for new local disclosure rules regulating sustainable investments says leading firm, Mourant, as the Jersey Financial Services Commission announces its feedback on a pivotal Consultation Paper relating to sustainable investments.
The JFSC's primary aim through the Consultation Paper [No. 1 2021 – Disclosure Requirements related to Sustainable Investments] is to counteract the potential for greenwashing by the industry. However, it's clear the regulator is seeking to do this in a way that is proportionate and doesn't place unduly onerous obligations on sustainable funds offered from the jurisdiction says the firm.
The JFSC has just announced that, from 15 July 2021, or 17 January 2022 for existing funds and Jersey investment businesses, new disclosure requirements will be introduced into the Codes of Practice for Certified Funds, Fund Services Businesses and Investment Businesses as well as the Jersey Private Fund Guide.
Felicia de Laat, Head of Funds at Mourant Jersey said: "ESG, sustainable and impact funds are an area attracting enormous interest, not only from investors and asset managers but also regulators and governments. The EU Sustainable Finance Disclosure Regulations are only the beginning. We expect to see the EU and the UK driving further regulation in this area and, as the international regulatory position evolves, we can therefore also expect the JFSC to update and adapt their own requirements to keep pace."
Sarah Huelin, Partner in the Financial Services and Regulatory team at Mourant Jersey said: "Industry is currently waiting on further consultation in relation to amendments to the Investment Business Code of Practice, in connection with arranging investments. Although those future changes might have a broader impact, investment firms must not overlook the need to update their procedures to ensure compliance with these new Sustainable Investments disclosure requirements within the next 6 months."
In summary, the JFSC is requiring Jersey funds promoting on the basis of making sustainable investments, and the FSB providers which govern the fund or accept responsibility for the marketing documents to disclose all material information on the fund's sustainable investment objectives and strategy. Jersey investment businesses that provide advice to clients on funds with sustainable investments have a similar (but slightly more limited) obligation to provide appropriate information on the fund's sustainable investment strategy and objectives.
The changes affect the Funds sector in Jersey in the following ways:
Funds: Jersey funds marketed on the basis of investing in sustainable investments (being investments which contribute to a social or economic objective) (Sustainable Investments) must disclose to potential investors all material information in relation to their sustainable investment objectives. This information includes alignment with specific taxonomies, the basis on which due diligence, performance measurement and reporting are likely to be conducted and limitations on methodologies and data.
Fund services providers: The Jersey governing body of a fund marketing Sustainable Investments or a Jersey fund services provider which accepts responsibility for the marketing documents of the fund must make sure that these disclosure requirements are included in the marketing documents. Fund services providers not caught by this requirement have a more limited obligation – to notify the JFSC if they become aware that these disclosures have not been included in the marketing documents.
Jersey Investment Businesses: IB providers have, once again, a slightly different obligation. If they wish to provide advice to clients on funds which market themselves as investing in Sustainable Investments as part of their investment objective, they must make available to their clients the appropriate information on the sustainable investment strategy and objectives of the fund or disclose that it is not available.