Background
In our May 2022 Consultation Paper we asked for feedback on proposals for two new items of guidance to be made under the Protection of Investors (Bailiwick of Guernsey) Law, 2020 (“the POI Law”):
1) Guidance setting out the Commission’s wider expectations regarding the transparency of environmental sustainability related claims and statements made in respect of Guernsey collective investment schemes which are authorised or registered under the POI Law, and
2) Proposed additional Guidance to be added to the Licensees (Conduct of Business) Rules and Guidance, 2021 (the “CoB Rules”), clarifying the Commission’s expectations in respect of promotion and advertising by persons licensed under the POI Law, and in particular in relation to avoiding the risks of greenwashing.
This Feedback Statement summarises the responses received and provides the Commission’s response. Final versions of the Guidance Note on Reducing the Potential Risk of Greenwashing by Guernsey Regulated Collective Investment Schemes and the revised Licensees (Conduct of Business) Rules and Guidance, 2021 have been published and come into effect from today.
Consultation responses received
Ten responses were received to our consultation from a cross-section of industry stakeholders and the Commission would like to thank all respondents for taking the time to read and respond to this consultation.
There were a number of questions and suggestions and these are addressed as follows:
Feedback
Some respondents requested that the proposed definition of “sustainable investment” be clarified and more closely align with internationally recognised definitions including that used in European Union regulations.
Commission response
The Commission has taken on board this feedback and has amended the definition used in the guidance accordingly to “environmentally sustainable investment” consistent with the EU Taxonomy.
Feedback
It was queried whether disclosures made by funds under the European Union’s Sustainability-related Financial Disclosure Regulation (“SFDR”) would be deemed to be sufficient to meet the disclosure expectations in the proposed new guidance for funds.
Commission response
Additional guidance has been added to the final guidance to clarify that a fund making SFDR-compliant disclosures would be deemed to be in compliance with the funds guidance., it should be noted however that disclosure may take any reasonable form relevant to the funds activity and there is no expectation that SFDR disclosure requirements would be followed.
Feedback
A comment was received asking that the proposed new CoB Rules guidance should not be a blanket requirement for all licensees but should be aimed primarily at promoters and investment managers.
Commission response
The new guidance shall apply to any licensee within scope of the existing Rule 5.4, i.e. where the licensee is “responsible for promotion and advertising”. The scope of application of this Rule is such that it is applied to licensees engaged in the relevant activity rather than a specific identified class of licensee. The new guidance does not extend the scope of application of the existing rule and where a licensee is not engaged in the relevant activity then the rule will not apply to it.
Feedback
It was suggested that the references in the proposed new CoB Rules guidance to “products” be replaced by “investments” to broaden scope of coverage, and also that the term “aims” should be replaced by “objectives”.
Commission response
The guidance has been amended to adopt these suggestions.
Feedback
It was requested that a definition of “greenwashing” in line with international standards be included within the new CoB Rules guidance.
Commission response
The definition of “greenwashing” used by the International Organization of Securities Commissions has been included within the guidance.
Timing of implementation
The new guidance comes into effect immediately.
Purpose of the Consultation Paper
The Commission seeks to regulate and supervise financial services in the Bailiwick of Guernsey with integrity, proportionality and professional excellence, and in so doing help to uphold the international reputation of the Bailiwick of Guernsey as a finance centre.
The term “greenwashing” refers to the practice of misrepresenting sustainability-related practices or the sustainability related features of investment products1.
Consistent with the Commission’s objectives, the proposals in this Consultation Paper are designed to enhance levels of confidence in the Bailiwick’s regulatory and supervisory framework for investment firms and collective investment schemes by reinforcing the Commission’s expectations relating to disclosure requirements in order to help mitigate the potential risks of greenwashing.
The purpose of this Consultation Paper is to seek feedback from all interested parties on detailed proposals for the introduction of:
Views are also sought on the future consideration of anti-greenwashing policy measures for other supervised sectors.
Please note that a concurrent Consultation Paper covering the proposed new Natural Capital Fund regime has also been issued by the Commission (https://www.gfsc.gg/sites/default/files/2022-05/20220405-%20Natural%20Capital%20Fund%20CP_0.pdf).
This Consultation Paper is a working document and does not prejudge any final decision to be made by the Commission.
1 Recommendations on Sustainability-Related Practices, Policies, Procedures and Disclosure in Asset Management Final Report, International Organization of Securities Commission, November 2021.
Following the consultation period, the Commission will collate and consider responses provided, with a view to introducing the Guidance Note on Reducing the Potential Risk of Greenwashing by Guernsey Regulated Collective Investment Schemes and adding the additional Guidance to the Licensees (Conduct of Business) Rules and Guidance, 2021 at some point during the second half of 2022.
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