Guernsey Green Fund Rules and Guidance, 2021 Consolidated Version (September 2022)

THE GUERNSEY GREEN FUND RULES and GUIDANCE, 2021 CONSOLIDATED VERSION

The Guernsey Green Fund Rules, as made under the Protection of Investors (Bailiwick of Guernsey) Law, 20201 (“the Law”), are set out in this document. This version incorporates amendments made, as set out in the footnote2.

Guidance, provided by the Guernsey Financial Services Commission (“the Commission”), is set out in the shaded boxes.

September 2022

1 Order In Council No. XVIII of 2020. 2 Amending instruments incorporated: The Guernsey Green Fund (Amendment) Rules, 2022.

Contents INTRODUCTION ................................................................................................................3 1.1 Application............................................................................................................................3 GUERNSEY GREEN FUNDS .............................................................................................4 2.1 Declaration............................................................................................................................4 2.2 Scope ......................................................................................................................................4 2.3 Investment criteria ...............................................................................................................4 2.4 Notifications..........................................................................................................................5 2.5 Designation ...........................................................................................................................7 2.6 Oversight of the Fund..........................................................................................................8 2.7 Removal of designation.......................................................................................................9 2.8 Prospectus disclosures.......................................................................................................10 2.9 Notification and filings to be submitted to the Commission.......................................12 GENERAL PROVISION....................................................................................................13 3.1 Interpretation......................................................................................................................13 SAVINGS, REVOCATIONS, CITATION AND COMMENCEMENT .......................14 4.1 Savings.................................................................................................................................14 4.2 Revocations .........................................................................................................................14 4.3 Citation and commencement............................................................................................14 SCHEDULE 1 Routes……………………………………………………………………………….15 SCHEDULE 2 Green Criteria……………………………………………………………...………18 SCHEDULE 3 Exclusion policies……………………………………………………...…………..20 SCHEDULE 4 Use of the Guernsey Green Fund Logo………………………………………...21 Appendix 1 Common principles for Climate Mitigation Finance Tracking…………………22 Appendix 2 Exclusion Policies……………………………………………………………………30

INTRODUCTION 1.1 Application (1) The Guernsey Green Fund Rules, 2021 replace the Guernsey Green Rules, 20183. (2) These Rules apply to the use of the description Guernsey Green Fund. (3) The Commission may in its absolute discretion, by written notice to a licensee, exclude or modify the application of any provision of these Rules. (4) The Commission may issue supplementary guidance regarding the standards of conduct and practice expected in relation to any aspect of the regulatory framework. Such guidance will not constitute rules of the Commission.

3 G.S.I. No. 33 of 2018.

Guidance Note: This document take a two-level approach – • the Rules set out the standards to be met by the licensee; and • guidance notes present suggested ways of showing compliance with the Rules. Licensees may adopt alternative measures to those set out in the guidance so long as it is possible to demonstrate that such measures achieve compliance. The text contained in shaded boxes contains guidance from the Commission and does not form part of the Rules.

GUERNSEY GREEN FUNDS 2.1 Declaration (1) A Guernsey Green Fund must be declared using either Route 1 or Route 2 as set out at Schedule 1.

2.2 Scope (1) A Guernsey Green Fund must be established with the objectives of – (a) spreading risk; and the criteria for the spread of risk must be specified in the fund’s prospectus; and (b) seeking a return for investors whilst mitigating environmental damage; and must meet one of the criteria set out in Schedule 2.

2.3 Investment criteria (1) The governing body of a Guernsey Green Fund, the designated administrator, and any manager or designated custodian must take reasonable steps to ensure that the Fund – (a) invests its property with the aim of spreading risk and with the ultimate objective of mitigating environmental damage, resulting in a net positive outcome for the environment; (b) comprises 75% of assets, by value, that meet the notified green criteria as set out in Schedule 2. The remaining 25%, by value, of the property must not – (i) lessen or reduce the fund’s overall objective of mitigating environmental damage; or (ii) comprise an investment of a type specified in Schedule 3; (c) only comprises of assets permitted to be held under its principal documents or prospectus and be of a nature or type described in its prospectus; (d) must not be invested in contravention of limits or restrictions imposed under its principal documents or prospectus.

2.4 Notifications (1) A licensee seeking, on behalf of a scheme, to use the description of Guernsey Green Fund must submit to the Commission – (a) the appropriate notification forms;

Guidance Note: In the event of a breach of the chosen green criteria the governing body of the fund should consider the most appropriate course of action, taking into account the type of assets in the Fund, the type of investors, and the disclosures in the prospectus. Such action could include any of the following non-exhaustive list – • the suspension of dealing; • the suspension of promotion; • the implementation of a risk mitigation programme; • any other action necessary to protect investors’ interests and the reputation of the Bailiwick; • the removal of the Guernsey Green Fund designation in accordance with rule 2.7.

Responsibilities of the designated administrator The designated administrator’s responsibility is to oversee the adherence to rule 2.3 (1) and the guidance above. Any breaches should be brought to the attention of the manager and the governing body of the Scheme and the Commission should be notified in accordance with rule 2.6. The designated administrator should also monitor to ensure that the investment adviser has been informed.

(b) a final version of the prospectus; (c) notification of the green criteria to be applied to the scheme; (d) in the case of – (i) a Route 1 scheme; a declaration, in accordance with Schedule 1, Part 1, that the scheme meets the notified green criteria which includes – a certificate from a suitable third party that the prospectus meets the notified green criteria; details of the third party’s name, address, and expertise; and confirmation that no conflict of interests exists between the third party and the governing body of the scheme; (ii) a Route 2 Scheme; a declaration, in accordance with Schedule 1, Part 2, that the prospectus meets the notified green criteria; (e) confirmation of whether the governing body of the scheme will incorporate ESG Principles into its investment analysis and decision making process; (f) the requisite fee; and (g) such other information as the Commission may require.

2.5 Designation (1) The Commission may designate a scheme to be a Guernsey Green Fund if – (a) it is satisfied that the scheme’s principal documents and prospectus appear, to the Commission, to comply with these Rules; and (b) a declaration has been provided, in accordance with rule 2.4 and Schedule 1, confirming that the scheme meets the notified green criteria. (2) A scheme must not describe or promote itself, by any means, as a Guernsey Green Fund unless designated in accordance with these Rules. (3) A scheme that meets, and continues to meet, the requirements in these Rules may be designated a Guernsey Green Fund and may use the logo, set out at Schedule 4, subject to any conditions issued by the Commission.

Guidance Note: Certification In the case of a Route 2 Scheme the declaration can be provided by either the designated administrator or the manager if an entity is licensed under the Law. A declaration can only be provided by a party contractually connected to the fund. Any changes to those parties would require a new declaration under rule 2.4.

ESG Principles Where ESG Principles are to be incorporated into the investment analysis and decision making processes any scheme participants are reminded that use of the UN Principles for Responsible Investment, and its logo, are independently governed by the PRI Association. See www.unpri.org

2.6 Oversight of the Fund (1) The designated administrator must ensure that the Guernsey Green Fund is monitored against the notified green criteria and the investment criteria. Where the Fund is an open-ended investment scheme such monitoring must be performed, at a minimum, on a monthly basis and where it is a closed-ended investment scheme, at a minimum, on a quarterly basis. Where the scheme is in contravention the designated administrator must – (a) immediately take steps to notify the designated custodian; (b) immediately ensure steps are taken to rectify the position; (c) if the position has not been rectified within one month of the date on which the contravention was identified – (i) notify the Commission; and (ii) provide the Commission with the proposals to rectify the breach; and (d) for a period in excess of two months from the date that the contravention was identified, ensure that all investors are informed or otherwise notify the Commission that su