The Guernsey Green Fund Rules, 2018

The Guernsey Green Fund Rules, 2018

The Guernsey Financial Services Commission (the “Commission”) in exercise of the powers conferred on it by sections 12, 14, 15, 16, 18 and 20 of the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended (the “Law”) hereby makes the following rules:-

1. GUERNSEY GREEN FUND There shall be a description of Collective Investment Scheme under the Law of “Guernsey Green Fund” A Guernsey Green Fund may be declared as either level 1 or level 2. A Collective Investment Scheme that meets, and continues to meet the requirements in these Rules may be designated a Guernsey Green Fund. Use of the designation (the Guernsey Green Fund badge) must be in accordance with Schedule 4.

2. SCOPE (1) These Rules shall apply to any Authorised scheme or Registered scheme which has declared that it meets the criteria to be a Guernsey Green Fund. (2) The Guernsey Green Fund must be established with the objective of spreading risk. The criteria for the spread of risk must be specified in the Guernsey Green Fund’s Prospectus (3) The Guernsey Green Fund must be established with the objective of seeking a return for investors whilst mitigating climate change and must meet the green criteria set out in Schedule 2 of these Rules. Guidance Note There is no requirement for a Guernsey Green Fund to have a Guernsey domiciled Manager however, for the purposes of these Rules any requirements placed on the Manager are only applicable to Managers licensed under the Law.

3. INVESTMENT CRITERIA Controllers of a Scheme, the Designated Administrator and any Manager or Custodian shall take all reasonable steps to ensure; (1) The property of a Guernsey Green Fund shall be invested with the aim of spreading risk and with the ultimate objective of mitigating climate change resulting in a net positive outcome for the environment. (2) A Guernsey Green Fund shall comprise 75% of assets by value that meet the green criteria set out in Schedule 2 of these Rules. The remaining 25% by value of the Scheme property must not: (a) lessen or reduce the scheme’s overall objective of mitigating climate change. (b) comprise an investment in any of the activities specified in Schedule 3. (3) A Guernsey Green Fund shall only comprise assets permitted to be held under its principal documents or Prospectus and of a nature or type described in its Prospectus. (4) A Guernsey Green Fund shall not be invested in contravention of limits or restrictions imposed under its principal documents or Prospectus. (5) A Guernsey Green Fund shall ensure that the investment criteria contained in these Rules are where the Scheme is: (a)a company specified in its memorandum of association; (b)a limited partnership specified in the Limited Partnership Agreement; (c)a trust specified in the Trust Deed. Guidance Note For the purposes of these Rules references to the Manager mean either the party responsible for managing the property of the Scheme and licensed under the Law, or the Designated Administrator. In the event of a breach of the investment criteria the Manager (or if no licensed Manager the Designated Administrator) should consider the most appropriate course of action taking into account the type of assets in the Guernsey Green Fund, the type of investors and the disclosures in the Prospectus. Such action could include any of the following non-exhaustive list: (a) The suspension of dealing; (b) The suspension of promotion; (c) The introduction of a risk mitigation programme; (d) Any other action necessary to protect investor’s interests and the reputation of the Bailiwick; (e) The removal of the GGF designation in accordance with section 7 of these Rules. Guidance Note Responsibilities of the Manager and the Designated Administrator The Designated Administrator’s responsibility is to monitor the adherence of paragraphs (1) to (5). Any breaches should be brought to the attention of the Manager and, if a company Scheme, the directors or, in the case of a unit trust scheme with no Manager, the trustee or, in the case of a limited partnership, the general partner. The Designated Administrator should also ensure that the investment adviser has been informed. The Designated Administrator should monitor the corrective measures that would be required by the directors, Manager and/or trustee or general partner (where applicable).

4. APPLICATIONS (1) The Designated Administrator of an authorised scheme or registered scheme seeking to use the description of Guernsey Green Fund shall submit to the Commission: (a) The appropriate application forms; (b) Final version of the Prospectus; (c) In the case of a Level 1 Scheme a Declaration, in accordance with Part 1 Schedule 1 that the Scheme meets the green criteria which includes:- (i) A certificate from a suitable third party that the Prospectus meets the green criteria, (ii) Details of the third party’s name, address and experience (d) In the case of a Level 2 Scheme a Declaration, in accordance with Part 2 Schedule 1 that the Scheme meets the green criteria; (e) Confirmation of whether the Guernsey Green Fund will or will not adopt ESG Principles; (f) The requisite fee as prescribed from time to time; (g) Such other information as the Commission may require. Guidance note on Certification In the case of a Level 2 Scheme, the declaration can be provided by either the Designated Administrator or the Manager, if an entity licensed under the Law. A declaration can only be provided by a party contractually connected to the Guernsey Green Fund. Any changes to those parties would require a new declaration under 4(1)(d) or 4(1)(e).

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 relating to their contents; (b) A Declaration has been provided in accordance with Schedule 1 to these Rules confirming that the Guernsey Green Fund meets the green criteria.

6. OVERSIGHT OF THE FUND (1) The Designated Administrator shall ensure that the Guernsey Green Fund is monitored against the green criteria on a monthly basis and where the Scheme contravenes the green criteria:- (a) Shall immediately take such steps as are necessary to rectify the position and notify the custodian (if appointed). (b) Shall if the position has not been rectified within one month of the date on which the contravention was identified: (i) Notify the Commission (ii) Provide the Commission with proposals to rectify the breach (c) For a period in excess of two months from the date that the contravention was identified the Licensee who submitted the Declaration shall forthwith ensure that all investors are informed. (d) Controllers of a Guernsey Green Fund, the Designated Administrator and any Manager or custodian shall cooperate with the Licensee who submitted the Declaration. (e) No Change to the Licensee who submitted the Declaration under Schedule 1 shall occur without the written consent of the Commission. Guidance note Paragraph 6(1)(a) – (c) do not apply to any Guernsey Green Fund during the first six months from the date on which persons are invited to become investors in the Guernsey Green Fund or until the Guernsey Green Fund is fully invested, whichever occurs first.

7. REMOVAL OF DESIGNATION (1) Where a Guernsey Green Fund continues after a period of 3 months from the date when the contravention was identified not to meet the green criteria then the Licensee who submitted the Declaration in accordance with paragraph 4 of these Rules shall: (a) Provide the Declaration of non-compliance under Schedule 1 Part 3 to the Commission (b) Ensure that the Scheme ceases to use the designation of Guernsey Green Fund on all documents and other material (electronic or otherwise) (c) Notify all investors of the steps taken under this paragraph (d) Place a copy of the Declaration under (a) in a prominent position on the Guernsey Green Fund’s website. (2) Without prejudice to 7(1) the Commission may remove the designation of a Guernsey Green Fund where: (a) A Guernsey Green Fund remains invested for more than 3 months in breach of the green criteria, or (b) At any stage after a Guernsey Green Fund ceases to meet the green criteria in order to protect: (i) The interests of investors, (ii) The public, or (iii) The reputation of the Bailiwick as a finance centre (3) The Commission shall take into account the circumstances of the breach and the rectification action taken. (4) Where at any point in the life of the Scheme it had been promoted (whether in its Prospectus or other marketing material) in accordance with ESG Principles then upon the giving of any certificate under 7(1)(a) the Scheme shall cease to so promote itself and paragraphs 7(1)(b) to 7(1)(d) shall be read to likewise apply to its use of ESG Principles, unless otherwise agreed in advance with the Commission.

8. PROSPECTUS DISCLOSURES (1) In addition to the disclosures required in any other rules to which the Guernsey Green Fund is subject the Prospectus shall at least contain: (a) The fact that the fund has received the designation of a Guernsey Green Fund; (b) The green criteria; (c) How the Guernsey Green Fund will meet its objective; (d) That the Guernsey Green Fund is: (i) Level 1, third party certified and which independent party will provide the certification. or (ii) Level 2, whereby the Manager, if an entity licensed under the Law, or the Designated Administrator has provided a Declaration (e) Sufficient information regarding the declaration or certification and the methodology used must be disclosed for any intended investor to make an informed judgment on the merits of investing in the Guernsey Green Fund. (f) If the Board of the Guernsey Green Fund and the Manager intend incorporating ESG Principles into investment analysis and decision making processes, that fact. (g) The Prospectus shall state any material conflicts of interest that an investor would reasonably require to enable such investor to make an informed judgement about the merits of investing in the Guernsey Green Fund. Guidance Note on third party provider The third party evaluation may take the form of a certification that the underlying assets of the Scheme are invested in accordance with the Scheme’s Prospectus and the green criteria or it can take the form of a green rating issued by a qualified third party.

9. NOTIFICATION AND FILINGS TO BE SUBMITTED TO THE COMMISSION Filings (1) Without prejudice to any other rules to which the Guernsey Green Fund is subject, the Designated Administrator shall submit to the Commission, within six months of the Guernsey Green Fund’s accounting year end, Form 143. Such Form shall detail how the Scheme has invested within the green criteria to which it is subject. (2) The Designated Administrator is required to ensure that it is reported to investors on an annual basis how the Scheme meets the green criteria. Guidance Note Rule 9(2) may be satisfied by a disclosure in the Guernsey Green Fund’s annual report and accounts. Notifications (3) The Designated Administrator of a Guernsey Green Fund shall give immediate written notice to the Commission of any material change to the disclosures in the Prospectus required of Section 8 of these Rules. (4) The Designated Administrator or Manager shall ensure that investors are notified of any change referred to in Rule 9.

10. INTERPRETATION Unless the context otherwise requires, in these Rules, expressions defined in the Law have the same meaning as they have in the Law, and the following have the meanings assigned to them: “authorised scheme” means a collective investment scheme that has been declared as an authorised scheme under Section 8 of the Law; “collective investment scheme” or “Scheme” has the meaning set out in the Law; “Designated Administrator” means a designated manager for the purposes of section 8 of the Law “controllers” Means in the case of Company, its Directors; in the case of a limited partnership, its General Partner; in the case of a Trust, its Trustees. “company” any Scheme constituted as a body corporate, including protected cell companies and incorporated cell companies; “the Commission” means the Guernsey Financial Services Commission; “custodian” Means a designated custodian for the purposes of section 8 of the Law “ESG Principles” means environmental, social and governance issues as set out by the Principles for Responsible Investment: the PRI; “green criteria” means the criteria set out in Schedule 2 to these Rules “Guernsey Green Fund” means either an authorised Scheme or a registered Scheme designated in accordance with these Rules where it meets the green criteria; the "Law" means the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended; "Licensee" means the holder of a licence to carry on controlled investment business issued under the Law; “Manager” in the context of these Rules means a manager of a Guernsey Green Fund licensed under The Protection of Investors (Bailiwick of Guernsey) Law, 1987. If the Scheme has no manager licensed in Guernsey then references to manager shall be deemed as reference to the Designated Administrator “Provider” means The Designated Administrator or where a Guernsey Licensee the Manager of the Scheme “Prospectus” means written particulars of a Guernsey Green Fund prepared, revised and published in accordance with these Rules and any other rules applicable to the Scheme; “these Rules" means The Guernsey Green Fund Rules, 2018; “registered scheme” means a collective investment scheme that has been declared as a registered scheme under Section 8 of the Law; “unit trust scheme” Means an authorised scheme under which the scheme property is held in trust for the investors

11. CITATION AND COMMENCEMENT These Rules, which may be cited as The Guernsey Green Fund Rules, 2018 are made on XX 2018 and shall come into operation on XX 2018.

SCHEDULE 1 Part 1 Level 1 • I hereby provide a copy of a certification provided by […insert name here…….] an independent third party that the Prospectus disclosures and the investment criteria of the Scheme meets the green criteria as defined in the Guernsey Green Fund Rules 2018. • I confirm that I have advised […insert name here……..] that it is an offence under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 as amended in respect of which the Commission exercises its functions, to knowingly or recklessly provide the Commission with information, which is false or misleading in a material manner. • I confirm that we, as proposed designated administrator/manager [delete as applicable] of the scheme, have performed sufficient due diligence on the third party certifier to be satisfied that the third party is truly independent from the Scheme and its associated parties and that the third party certifier has adequate experience and resource to provide, and continue to provide, a reliable and accurate assessment of the Scheme’s ability to meet the green criteria as defined in the Guernsey Green Fund Rules 2018. • I confirm that we, the proposed designated administrator/manager [delete as applicable] of the scheme, are content that the disclosures in the scheme’s Prospectus and any other marketing material meet the requirements of the Guernsey Green Fund Rules, 2018. • I confirm that the information supplied is complete and correct to the best of my knowledge and belief at the time of submission and that there are no other facts material to the application of which the Commission should be aware. • I am aware that it is an offence under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 as amended in respect of which the Commission exercises its functions, to knowingly or recklessly provide the Commission with information, which is false or misleading in a material manner. Part 2 Level 2 • I confirm that we, as proposed designated administrator/manager [delete as applicable] of the scheme, have performed sufficient due diligence to be satisfied that the objective of the scheme encompasses climate change mitigation and that the scheme’s investment criteria meets the green criteria as defined in the Guernsey Green Fund Rules, 2018. • I confirm that we, the proposed designated administrator/manager [delete as applicable] of the scheme, are content that the disclosures in the scheme’s Prospectus and any other marketing material meet the requirements of the Guernsey Green Fund Rules, 2018. • I confirm that the information supplied is complete and correct to the best of my knowledge and belief at the time of submission and that there are no other facts material to the application of which the Commission should be aware. • I am aware that it is an offence under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 as amended in respect of which the Commission exercises its functions, to knowingly or recklessly provide the Commission with information, which is false or misleading in a material manner. Part 3 Declaration of Non-Compliance • We, as designated administrator/manager [delete as applicable] of the scheme, have assessed the scheme against the disclosures in the Prospectus and the Guernsey Green Fund Rules 2018 in accordance with Sections 3 and 6 of the Guernsey Green Fund Rules 2018 and hereby confirm that the scheme no longer meets the green criteria. • We, as designated administrator/manager [delete as applicable], hereby confirm that the scheme will no longer use the designation of a Guernsey Green Fund and will ensure that no references are made to it in the Prospectus or marketing material. • We, as designated administrator/manager [delete as applicable], hereby confirm that all investors in the scheme have been notified that the scheme no longer meets the green criteria and is no longer a designated Guernsey Green Fund. • I confirm that the information supplied is complete and correct to the best of my knowledge and belief at the time of submission and that there are no other facts material to the declaration of which the Commission should be aware. • I am aware that it is an offence under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 as amended in respect of which the Commission exercises its functions, to knowingly or recklessly provide the Commission with information, which is false or misleading in a material manner.

SCHEDULE 2 Common Principles for Climate Mitigation Finance Tracking Table 1 – List of activities eligible for classification as climate mitigation finance These Principles have been taken from the work done by the major global development finance institutions (the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank, the International Finance Corporate, World Bank, and the International Development Finance Club). The Principles consist of a set of common definitions and guidelines in addition to the table of activities listed above which can be found at the following link: http://climateobserver.org/reports/common-principles-for-climate-mitigation-finance-tracking/ Category Sub-category Example

1. Renewable Energy 1.1 Electricity Generation Wind power Geothermal power (only if net emission reductions can be demonstrated) Solar power (concentrated solar power, photovoltaic power) Biomass or biogas power that does not decrease biomass and soil carbon pools (only if net emission reductions can be demonstrated) Ocean power (wave, tidal, ocean currents, salt gradient, etc.) Hydropower plants (only if net emission reducti