Innovation is a multi-faceted concept; it might involve wholesale technical change, utilising cutting-edge technology. Equally, it could simply be overhauling current procedures and practices to find new ways of performing existing tasks. Finally, it might involve investment in or development of, new industries or sector opportunities.
Over the past couple of years there has been a surge in public anxiety about the environment. This can be demonstrated readily in the UK by the fact that climate emergency has risen to the top of the UK’s election agenda, and sits alongside Brexit and health as one of the main issues facing the country. According to the executive director of the Green Alliance this would have been “unthinkable” even five years ago.
The dramatic shift in focus has been attributed to key factors such as protests by Extinction Rebellion, Greta Thunberg catching the imagination of many young people (and arguably their parents as well), scientists making it clear that rising temperatures are causing immediate problems which need to be tackled imminently, and Sir David Attenborough conveying in his inimitable style the message that the threat of climate change is real and dangerous.
The Paris Agreement, which came into force in 2016, saw the world come together to agree a plan to essentially strengthen the global response to the threat of climate change by keeping a global temperature rise this century to below 2°C and to pursue efforts to limit the temperature increase even further to 1.5 degrees. The Paris Agreement also aimed to increase the ability of countries to deal with the impacts of climate change and to make finance flows consistent with low greenhouse gas emissions and climate-resilient pathways.
Guernsey, for its part, made a strategic commitment to green finance within the Financial Services Policy Framework in 2018, and the formation of Guernsey Green Finance (the body through which Guernsey delivers on its strategic commitment to sustainable finance). In early November 2019 Guernsey’s green finance initiative was given additional funding of GBP 300,000 from the States of Guernsey, thereby assisting Guernsey to deliver its ambition of becoming a leading jurisdiction for green and sustainable finance.
Guernsey green fund
In 2018, Guernsey also introduced the world’s first regulated “green fund” product, the Guernsey Green Fund (GGF), which offers investors certainty on the “green credentials” of their investment. Any investment fund established and regulated in Guernsey can seek to be designated as a GGF, provided that it complies with the Guernsey Green Fund Rules and ensures that its portfolio meets the “green criteria”. A recent example can be seen in Resonance British Wind Energy Income II, a new GGF which has been launched to support the growth of the wind farm sector in the UK and Ireland.
Whilst governments are now playing their part in tackling the dangers of climate change, the private wealth sector has enormous scope to positively influence strategies around environmental, social and governance (ESG) investing.
Private Wealth and Family Offices
Ultra-high net worth individuals and family offices in particular could have a great influence on sustainable investing, thereby ameliorating environmental concerns. Family offices, which cater for single or multiple family structures, provide a complete suite of financial and investment services for the family and are each structured differently from one another, depending on the particular needs of the family. An industry saying sums it up perfectly: “If you’ve seen one family office, you’ve seen one family office.”
There are many reasons why family offices choose to practice the principles of responsible investment, including the families’ values, financial motivations and peer influence. Of notable importance is the restructuring for intergenerational transfers of wealth where the demand for ESG investing is being led principally by millennials and those under 40.
Everybody has a part to play in creating positive environmental change and in a recent report commissioned by Guernsey Finance, wealthy individuals suggested that professional advisers should do more to take the lead in driving the understanding of green and sustainable investing. Whether this be through “green funds” or investing in tech businesses providing smart solutions to reduce the carbon footprints of existing businesses, Guernsey is especially well placed to drive the green initiative forward by offering wealthy individuals and family offices a transparent and well-regulated environment through which to invest their capital.
Sir David would (hopefully) be proud.
First published by Business Brief, February 2020