James Tracey discusses how the financial sector is shifting toward a sustainably driven future
The financial sector plays a vital role in global sustainability efforts. Over the last few years, there’s been incredible growth in sustainable finance, and it continues to rise. Green financing has grown 100 times over in the last decade, and we’re also seeing a higher number of green securities and impact investments. Mounting appetite for ESG-driven funds and a wider embrace of sustainable regulation suggests the sector is at an exciting inflection point.
At Oak Group, we believe the financial industry is heading toward a model where sustainability sits at its core. In light of this, Sustainable Finance Week 2023 holds more significance than in previous years. That’s because the decisions that we make in the coming year will have a massive impact not just on the sustainable finance market, but also on our planet.
Indeed, the sustainable finance sector has already seen many positive developments. So, to mark Sustainable Finance Week 2023, here are some of the things we want to celebrate.
Growing environmental awareness among investors and businesses has led to a rise in sustainable investments. In short, investors are starting to take ESG topics into serious consideration and are leveraging environmental factors into long-term risk assessments. Studies reveal that global ESG assets are expected to exceed USD 53.3 trillion by 2025 alone. As a result of demand, particularly in Europe and the U.S., there’s also been an increase in the availability of sustainable investment products.
Guernsey and other jurisdictions have introduced many green financial products in the last few years. This includes the Guernsey Green Fund introduced in 2018 and the world’s first Natural Capital Fund proposed in 2022. As Oak Group is headquartered in Guernsey and strategically positioned across neighbouring financial offshore jurisdictions, we share a close professional relationship with governing and regulatory bodies, making us well-equipped to support those ready to get involved with sustainable finance.
Government bodies are starting to pay attention to the rise in sustainable investments. This is evident from the increased financial regulation that’s emerged in the last few years. Introduced in March 2021, the European Union's Sustainable Finance Disclosure Regulation (SFDR) acts as a regulatory framework that promotes transparency in sustainable finance. It requires disclosures about sustainable risk assessments, as well as strict guidelines that tackle greenwashing. There have been many SFDR amendments since its introduction, meaning the regulatory landscape is constantly evolving.
Bringing our focus closer to home, many regional guidelines have also been issued to enhance sustainable finance in offshore jurisdictions. For instance, in addition to aligning Guernsey investments with the SFDR, the jurisdiction released its own CIS guidance on greenwashing. This helps investors navigate the sustainable financial landscape with confidence it's free from greenwashing.
Collaboration between the public and private sectors has been crucial for sustainable finance. It allows for more mainstream exposure and boosts awareness among investors, businesses, and the general public. Again, this is where Oak’s strengths lie. As administrators, Oak’s role in providing regulatory guidance to all of its fund clients has been crucial to facilitating compliance in key financial jurisdictions.
Quinbrook Infrastructure Partners, for example, is just one of many Oak clients that have benefited thanks to our deep understanding of local financial regulation. With Oak's guidance, Quinbrook successfully leveraged the ‘Jersey Eligible Investor Fund’ regime in their Clean Energy Fund fundraising efforts, resulting in a substantial $1.6bn raise.
Studies have found that a shift toward a low-carbon future driven by sustainability could generate millions of jobs and inject a massive boost to GDP. From our perspective, sustainability is a driver of long-term growth and can help support resilience across business and financial sectors. So, it should come as no surprise that we’re seeing a growth in sustainable investments that have long-term goals.
Oak’s teams across Guernsey, Jersey, and the Isle of Man are committed to supporting resilience among all its clients. That way, our clients can protect and grow their assets over the long term.
We are proud to collaborate with clients who embrace ESG principles wholeheartedly and we are currently supporting clients that are committed to developing assets aligned with the highest ESG standards, exemplified by their client-supplier charter that defines their expectations from us. Together, we are creating a better future and promoting sustainable change.
We’re also bearing witness to some fantastic innovation that’s driving the sustainable finance industry forward. Technology has enhanced the development of new products and transformed how we measure sustainability benchmarks. Earlier this year, the EIB introduced the world's first-ever blockchain-based digital green bond. Championing transparency has set a precedent for further green investments powered by advanced technology. ESG software platforms and blockchain-powered investing can transform how we approach sustainable finance. Such tools can help offer real-time tracking and reporting while giving investors a robust overview that can impact key financial decisions.
Technology has also allowed operators in the sustainable finance field, such as Oak Group, to better support its clients and deliver a tailored service. Oak has embraced digital tools that enable us to understand clients' environmental impact, facilitating the delivery of high-quality services help align seamlessly with our net-zero glidepath. In a testament to that, Oak Group was awarded the Cybersecurity Award at the Digital Jersey Tech Awards in 2022.
Internally, our commitment to sustainability has been made possible thanks to technology. This forms part of the digital transformation we’ve introduced as part of Project Horizon — our three-year ESG strategy. Oak Group has also leveraged ESG accounting technology to support our environmental commitment. By partnering with FutureTracker, a smart technology platform that provides emissions reporting, we were able to make massive reductions in energy usage across all our office sites. By receiving a detailed breakdown of our carbon emissions, Oak used this data and FutureTracker’s support to spearhead an impactful carbon reduction plan
Investors make impact investments to achieve both environmental and financial gains.
We’re seeing a steady rise in investors leveraging impact investing in order to have a positive impact on the planet. Forbes recently reported that the private impact market grew by 63% between 2019 and 2021, and was now valued at more than $1.2 trillion.
If anything, purpose-driven investments have set a baseline for the future of sustainable finance. And, we’re confident it’ll unlock further opportunities in the ESG field. As an increased number of investors turn their focus to impact investing, it’ll likely inspire a wider global financial shift that places more importance on sustainable and equitable goals.
I always welcome clients and prospective clients to ask me questions on Sustainable Finance, if you have any questions, please don’t hesitate to get in touch.
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