The Impact Economy Brief | 26 April


Impact Economy

There’s been a lot happening in Bates Wells’ Impact Economy practice since our celebration in January. If you were unable to attend, you might like to watch the short video that we screened at the party, which explains the ethos of our Impact Economy practice.

We’re planning on sending this fortnightly ‘Brief’ as a helpful reference point and resource to our network, to give you an overview of activity in the Impact Economy. You won’t be surprised to see that we’ve taken a particular interest in legal and regulatory developments.

We hope you find the Brief to be a valuable digest of the things you need to know, and invite you to tell us what you’d like to read more about.

Please note that this Brief covers a longer period following the Bank Holiday.

Talk the Talk

As the language of the Impact Economy develops, we’ll add relevant terminology to our Impact Economy Glossary, to help share a common understanding. This week’s jargon is:

“Natural Capital”

Editor’s Pick

If you only have 3 minutes of quiet this week, we recommend…

The entrepreneur behind the coveted B Corp label shares why he’s partnering with the UN to solve our most pressing workforce problems. Business Insider interviews B Lab co-founder, Jay Coen Gilbert, about current B Lab projects aimed at helping large corporations recognize the benefits of stakeholder-based business.

Impact Business

Patagonia takes a stand against companies that aren’t working to better the environment. Huffington Post reports on Patagonia’s new policy of refusing to produce co-branded clothing for companies that don’t share the company’s environmental ethos.

BlogIntrapreneurs in finance: creating systemic change from within. A Finance Innovation Lab blog on the need for deeper, systems-level innovation, drawing on its work supporting innovators to build a financial system that better serves people and the planet.

Times letters: Business and the climate change rebellion. In a letter to The Times, a group of businesspeople, including former CEO of Unilever Paul Polman and The Body Shop’s CSO, Chris Davis, show support for Extinction Rebellion’s new platform, XR Business, and call for businesses to recognise a climate emergency. (Business Green provides some free-to-access commentary on the letter). UPDATE: a subsequent communication from Extinction Rebellion has clarified that XR Business is a separate entity and will be rebranded. 

A longer readThe B Corp Handbook (Second Edition): How You Can Use Business as a Force for Good. Billed as the authoritative guide to the what, why and how of B Corp certification, the B Corp Handbook 2nd ed. is now available to buy.

PodcastViral Sensation Rutger Bregman On How Utopian Ideas Can Become Reality. Intelligence Squared interviews the author of Utopia for Realists: And How We Can Get There, on a range of topics, including his plans for saving capitalism.

Impact Investment

Creating Impact – The Promise of Impact Investing is a new report from the International Finance Corporation (IFC) that assesses the total amount potentially available for impact investment at up to $269 trillion, with the appetite for impact investing estimated at up to $26 trillion. Big Society Capital comments on the report. The IFC has also launched the Operating Principles for Impact Management.

BlogFinding the right impact investor for your social enterprise. Rupert Scofield, president and CEO of FINCA International, writes for Pioneers Post to share tips for investment-ready entrepreneurs.

The Dormant Assets Scheme: A Blueprint for Expansion is a new Government-commissioned report setting out a plan to expand the UK’s dormant assets funding scheme beyond only banking sector assets. Civil Society reports on the publication.

PodcastCan capitalism evolve before it’s too late? Matthew Weatherley-White, co-founder at Caprock and advisor to family offices on impact investing, speaks to Good Futures about the global impact investing market, family offices and climate change.

The Global Impact Investing Network has launched the Core Characteristics of Impact Investing; tenets to provide markets with greater clarity on what constitutes credible impact investing. Big Society Capital comments on the launch.

Legal and Regulatory

A call for action – Climate change as a source of financial risk is the first report from the Network for Greening the Financial System (NGFS), a group of Central Banks and Supervisors formed to develop environment and climate risk management in the financial sector and mobilize mainstream finance to support the transition to a sustainable economy. The Bank of England’s Mark Carney, the Governor of Banque de France François Villeroy de Galhau, and NGFS’ Chair, Frank Elderson, wrote an open letter on climate-related financial risks accompanying the launch of the report.

BlogAn overview of the Auditing Framework for Artificial Intelligence and its core components. The ICO has published details of the proposed structure and focus for its new auditing framework for AI, including raising organisations’ understanding of good governance and AI-specific data protection risks.

Draft Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 have been published. If approved, from 10 June 2019 the new regulations will amend the Companies Act 2006 and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. The amendments will widen the scope of reporting requirements to include unquoted traded companies, and the remuneration of CEOs and deputy CEOs. There will also be changes to the requirements for the directors’ remuneration policy, the directors’ remuneration report, and the approval required for director payments outside of the remuneration policy. The new regulations are intended to strengthen governance, giving shareholders more information to assess directors’ performance and the effectiveness of their remuneration. An explanatory memorandum is available.

Vedanta Resources plc & another v Lungowe & others ([2019] UKSC 20, 10 April 2019). The Supreme Court has given judgment on an appeal by an English parent company (Vedanta) and its Zambian subsidiary, in relation to a case where the claimants want to take action against both companies in the English Courts. The claimants are Zambian individuals alleging that they have been harmed by mining activity carried out by the subsidiary, and that Vedanta failed to monitor and control its subsidiary. Although this judgment relates to the appropriate jurisdiction for the case to be heard, rather than to the substance of the case itself, the Supreme Court’s determinations included confirming that Vedanta would “arguably” owe the claimants a duty of care and made reference to materials published by Vedanta, including a sustainability report, asserting its assumption of responsibility over the subsidiary for proper environmental standards. The Supreme Court also held that there was a real risk that the claimants would not be able to obtain substantial justice in the Zambian legal system, thus making England the preferred jurisdiction. Although the law on parent company liability for foreign subsidiaries is far from settled, this judgment confirms that claims can be brought in England against English-domiciled companies in relation to the activities of their subsidiaries.

The Sir Donald Brydon Independent Review into the quality and effectiveness of audit has launched a call for views on the extent of assurance that audit currently provides to users of financial statements, and how it could better serve the interests of other stakeholders and the wider public interest. Responses are requested by 7 June 2019. This is one of three independent reviews into auditing, initiated in light of recent high-profile audit failures.

Independent Governance Committees (IGC): extension of remit is a new consultation by the FCA regarding IGCs, which provide independent oversight of the value for money of workplace personal pensions provided by firms such as life insurers and SIPP operators. Inter alia, the consultation proposes a new IGC duty and accompanying guidance to oversee firms’ ESG policies.

Disclaimer – The information contained in this briefing is not intended to be a comprehensive update – it is our selection of third party reports, news, podcasts and other materials, as well as some content produced by Bates Wells where indicated as such, which we think will be of interest to those working in the Impact Economy. This content is necessarily of a general nature; it does not constitute advice, and specific advice should always be sought for specific situations.

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 April 26, 2019.