Sustainable Finance Lunch and Learn: CSD and JFSC Consultation

Dipak outlined the fundamentals of sustainability reporting, including risk identification, materiality analysis, and the importance of being assurance ready. Despite global variation in standards, the core pillars remain consistent: stakeholders, especially investors, want clear, decision-useful information on how organisations measure, monitor and manage sustainability-related risks and opportunities.

Dipak also provided a global update:

• International Sustainability Standards Board: Released standards S1 and S2, with more in development
• EU: ESRS standards simplified (not softened)
• UK: Key consultations closed; mandatory reporting is on the horizon
• USA: Regulatory uncertainty as the SEC halts legal defence of climate rules
• Guernsey and Jersey: Consultations held; awaiting next steps

As sustainability reporting becomes more prominent and, in many cases, inevitable, businesses should:

• Enhance systems and governance frameworks
• Improve data collection and value chain mapping
• Engage employees and ensure board-level oversight
• Prepare for increasing assurance expectations

Daniella and Matthew from the JFSC provided updates on the commission’s sustainable finance consultation and shared insights from their recent feedback paper, outlining regulatory expectations and future direction.

The JFSC received 20 formal responses from a wide cross-section of stakeholders and hosted drop-in sessions attended by 23 participants.

Five core areas were explored: corporate governance, internal controls, de minimis thresholds, sustainability claims and impact.

Key feedback themes included:

• Policy support: Broad support for the initiative, with concerns over implementation costs and competitiveness.
• Preference for guidance: Strong preference for guidance rather than new Code provisions on sustainability risks, citing duplication and a desire to maintain principles-based regulation.
• Terminology clarity: Calls for clearer definitions of “sustainability risk,” “materiality,” and “proportionality.”
• De minimis rule: Majority opposed a threshold-based exemption, preferring proportionate implementation across all firms.
• Business integrity: Strong support for strengthening Principle 7 with alignment to international standards, including the FCA’s terminology.

The JFSC reaffirmed its commitment to embedding sustainability within risk management frameworks while recognising industry’s call for clearer, practical guidance.

Key decisions include:

Sustainability risks: No immediate changes to the Codes; instead, new industry-informed guidance will be issued to support firms in managing these risks proportionately and effectively.

Business integrity (Principle 7): Code enhancements will proceed, requiring “robust evidence” (replacing “credible”) to support sustainability claims in line with UK and EU standards.

As noted in the JFSC’s policy response:

“If increased compliance costs pose a greater threat than the environmental or social risks themselves, we must accept that we have lost perspective.”

A Sustainable Finance Guidance Note will be published in Q1 2026, covering both sustainability risks and business integrity.

Revised Code provisions on anti-greenwashing will follow a one-year transition period, with full implementation by Q1 2027.

Industry collaboration will continue throughout the development of the guidance to ensure it is practical and tailored to Jersey’s market.

This measured approach ensures Jersey remains aligned with global standards while supporting its finance industry to manage sustainability-related risks effectively and credibly.