Sung-Hyui, what were you doing before you came to BWB?
I was previously working for a magic circle law firm as a banking lawyer. My practice covered a wide range of international lending-focused transactions, acting for lenders and borrowers on acquisition finance deals involving private equity buyers, investment grade corporate deals, emerging market transactions with a particular focus on Africa as well as real estate and insurance financing work. It was great experience to get involved a real breadth of different finance deals and to understand the challenges and motivations behind various types of financing structures.
What brought you to BWB?
I was very involved with pro bono projects at my previous firm, and I found advising on social investment deals raising financing for charities, social enterprises and other impact-focused organisations particularly fascinating and rewarding, as it allowed me to use my skills as a finance lawyer to create positive social impact. It felt like a real privilege to work with institutions that were trying to create real change in society and make a real difference to local communities. I started thinking about how I could work with more of these types of clients.
I knew that BWB was a clear leader in this field, especially in social finance and ventures – I had heard about Luke and the team through following sector news. Once I started learning more about BWB, what really drew me was the firm’s commitment to being at the forefront of policy developments, finding solutions which seek to honour the integrity and social purpose of the civil society organisations benefiting from investment and, perhaps most importantly, practising what it preaches: I was really impressed, for example, that BWB was the only UK law firm to certify as a B Corp.
What is important to you in your work at BWB?
In the social investment sector, we often see “traditional” commercial documents being used as the basis for social finance deals, such as the Loan Market Association template for loan agreements. I see part of my job as making sure that these documents are as accessible and clear as possible for all parties, incorporating bespoke features such as social outcomes and particular requirements for charities and social enterprises (where applicable), while retaining the original quality and technical workability of the documents. For me it is about adapting, and translating the underlying principles in a way that can be of most use to achieve the greatest social impact.
Can you tell us about an interesting current development in the sector?
Impact investing is a movement that is really gaining momentum. It’s an exciting time to see traditional financial and investment institutions gradually come round to the notion that organisations that focus on social and environmental impact can also generate stable financial returns, and therefore be a viable – even “mainstream” – investment option. It signals a potential turning point where sizeable amounts of global capital (from institutional investors such as insurance companies and pension funds) could be unlocked to address some of society’s most urgent social and environmental challenges, through investment into sectors as diverse as community housing, renewable energy and female education.
What does “impact investing” mean?
The term “Impact Investing” is still relatively new – the 10th anniversary of the coining of this term was only celebrated earlier this month! – and we have seen it used in a number of different ways. A fairly common way of defining impact investing is as investment into companies or other entities which seek to generate a social and/or environmental impact in addition to a financial return. With respect to the scope of expected financial returns, we see that some investors seek to maintain market- (or even above-market!) rates of financial return alongside a degree of social impact, whereas other investors prioritise social impact for below-market returns, depending on their individual strategic goals.
Given my background in private equity and emerging market deals, it has been interesting to see how “traditional” debt and equity structures have been adapted to meet the specific features of impact investments, such as the growing use of guarantees from state agencies and other high-credit institutions to unlock more capital, the emergence of “evergreen” holding structures to remove the need for exits and to provide long-term support for impact-focused investees, and the creative use of debt, equity and “hybrid” convertible loan and quasi-equity instruments.
Do you see this area as one to watch?
Absolutely. It is encouraging to see the various strands of “traditional” business and finance increasingly embrace the notion that positive social and environmental impact can be achieved alongside financial returns, including through developments in socially responsible business (including the Mission-led Business Review in the UK and the spread of the global B Corp movement) and greater focus on good “ESG” (environmental / social / governance) practices in for-profit companies. It is particularly encouraging to see that some of the practices and “philosophies” of those who have championed social investment over the years are gradually becoming adopted by the mainstream investment market.
As the impact investing market grows and matures, a key challenge for it will be to ensure that the pressure to achieve consistent financial returns does not override the need to preserve and nurture the mission and integrity of what impact investee organisations are trying to achieve. One way that this could be done is through embedding mission within the investment structure and relevant documentation, and we look forward to seeing how this develops as market practice continues to evolve in this field.
This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.
All content on this page is correct as of February 24, 2017.