Kobus Cronje, Managing Director – Guernsey, and Mariana Enevoldsen, Client Services Director, discuss current drivers shaping the Guernsey funds market and explore what the future holds:
Q: What are the biggest themes within the Guernsey funds space at the moment?
Kobus Cronje (KC): The biggest theme that has really come to the fore in the Guernsey funds landscape over the last 12 months is ESG. Anything to do with social, environmental, and governance has become prominent. We’ve seen that reflected in our workstreams here at JTC in a number of ways – through funds with an ESG element requiring administration support, and through fund managers drawing on our Guernsey ManCo capabilities to set up robust fund structures.
Q: Can you elaborate a bit more on ESG evolution in Guernsey?
Mariana Enevoldsen (ME): There’s no doubt that sustainable products are big in Guernsey. It’s a narrative that started around four years ago with the launch of the world’s first regulated green investment fund product, the Guernsey Green Fund which added considerably to Guernsey’s toolbox.
The environment has matured since then – The International Stock Exchange (TISE), for instance, followed by creating a sustainable finance segment and more recently a transition offering. Earlier this year, the GFSC launched a new Natural Capital Fund regime, augmenting and complementing the green finance proposition further. We are seeing carbon offset products coming through under that umbrella now.
KC: Against this backdrop, we are positioning ourselves as an ESG specialist in the Channel Islands market. We have the expertise in house to support the sophisticated and rapidly evolving ESG requirements of fund managers – regarding the EU’s Sustainable Finance Disclosure Regulation (SFDR) disclosures, taxonomy, and the regulatory wave that the industry is seeing, for example. We’re drawing on tech to enable us to do that and that approach has resulted in a number of opportunities to support both non-Guernsey and Guernsey-domiciled funds, with an environmental, sustainable or clean energy focus.
JTC itself has strong ESG credentials too – we are a carbon neutral business, a signatory to the UN PRI and we take our responsibilities seriously in making a positive contribution to our planet. Our clients can leverage the knowledge and expertise we have developed in this complex area through our ESG services.
Q: How do you see that green finance trend developing over the coming months?
KC: The macro-economic factors have undoubtedly dampened some of the enthusiasm that we had begun to see in the market, both Guernsey and internationally.. However, the appetite to allocate to ESG assets is a long-term trend and that will persist, it’s more a case of fundraising being on hold at the moment due to the challenging macro-economic climate.
ME: On the regulatory front, in September 2022 the GFSC issued guidance to counter the risk of greenwashing, and the FCA, has recently announced its anti-greenwashing proposals. There’s a general view that there is a need for clarity around disclosure requirements and anti-greenwashing controls to be in place as the ESG sector grows.
Q: Looking into 2023, what’s on the horizon for Guernsey’s funds sector?
ME: The service provider environment generally is interesting, and the global trend towards consolidation is amplified in Guernsey but at the same time we have seen a number of new niche players emerging. The market is disrupted from that perspective – but it does provide an opportunity for well-established firms like JTC to attract talent in an environment where there is high competition for staff. We are proud to have a low turnover rate compared to our peers and it is a key metric in our annual report.
KC: More widely, the economic outlook going into 2023 is going to be interesting and stability and certainty are going to be the watchwords. JTC is the only remaining London-listed business in Guernsey and that makes us well-positioned to weather the storm, take advantage of the dynamics in the Guernsey service provider landscape, and provide the certainty managers and investors look for.