Jersey Funds Law Series: ESG Funds and Sustainable Investments

• Jersey disclosure requirements for ESG Funds

• Obligations placed on Jersey fund service providers in relation to ESG Funds

• Obligations on persons providing investment advice to clients in relation to ESG Funds

This was in response to growing international concern about firms marketing investments that appear more environmentally and socially focussed than they really are, and changes to international regulation.

Jersey Funds

When a Jersey ESG Fund (ie a Jersey Private Fund or a Collective Investment Fund) is marketed on the basis of investing in a Sustainable Investment as part of its investment objective, it must disclose (via website, or pre-contractual document, private placement memorandum, offer document, or documents in which the terms of investing in the fund are contained such as a subscription agreement) all material information in relation to the sustainable investment strategy and objectives; including but not limited to:

• alignment with any specific taxonomy, or where there is no alignment to a specific taxonomy a statement to that effect;

• the proportion of investments that are sustainable;

• the basis on which due diligence, benchmarking, and performance measurement and reporting, are likely to be conducted; and

• any limitations to methodologies and data.

Funds Services Businesses

Similarly, when a funds services business (ie a Jersey fund service provider regulated for the conduct of fund services business under the Financial Services (Jersey) Law 1998 (the "FS Law")) (a "Registered Person") provides services in relation to an ESG Fund, the Registered Person is under an obligation to disclose the same material information in respect of such an ESG Fund, but only if:

• the Registered person cannot evidence that the ESG Fund has complied with the equivalent requirement in the Code of Practice for Certified Funds; and

• the Registered person is the governing body of the ESG Fund (eg self-managed fund, general partner or trustee) or otherwise accepts responsibility for the website, pre-contractual document, prospectus, or documents in which the terms of investing in the ESG Fund are contained such as a subscription agreement.

Where a Registered person is not subject to the disclosure requirements set out above, the Registered Person must still notify the JFSC, in writing, within five business days of the Registered person becoming aware of the ESG Fund not disclosing such material information in relation to the sustainable investment strategy and objectives of the ESG Fund.

Investment Business

Persons registered to carry on Investment Business under the FS Law that provide investment advice on ESG Funds must either inform and make available to the client, the appropriate disclosure information in relation to the sustainable investment strategy and objectives of the ESG Fund, or inform the client if no such disclosure information is available.

JPF Guide and Codes of Practice

The regulatory requirements which we have explained above are set out in the relevant Codes of Practice and the Jersey Private Fund Guide (listed below):

• Certified Funds Code of Practice;

• Fund Services Business Code of Practice;

• Investment Business Code of Practice; and

• Jersey Private Fund Guide.

How can we help?

Walkers’ Jersey funds team has advised on the launch of a number of ESG Funds and was actively involved in the consultation and drafting stages of the new ESG rules summarised in this briefing. Please contact your usual Walkers contact if you wish to find out more.

The information contained in this guide is necessarily brief and general in nature and does not constitute legal or taxation advice. Appropriate legal or other professional advice should be sought for any specific matter.