The Impact Economy Brief | 7 February

Welcome to the latest edition of Bates Wells’ Impact Economy Brief.

Our fortnightly ‘Brief’ is intended to be a helpful reference point and resource for our network, providing 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.


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:

“Asset lock”


Editor’s Pick

If you only have 5 minutes of quiet this week, we recommend…

Moving from Alpha to Beta: BlackRock and the Basics of Financial Sustainability. The Shareholder Commons writes for B The Change, making the argument that the ‘business case’ for ESG is self-defeating for universal investors, because an alpha-first strategy directly undercuts the aim of lifting average market performance.


Impact Business

Can tech help reinvent the community lending sector? For Pioneers Post, Chris Gorst from Nesta Challenges looks at how fintech disruptors could help give community lending a new burst of energy, by reference to Nesta’s partnership with HM Treasury to create the Affordable Credit Challenge.

A longer read – The World Fair Trade Organization (WFTO) has published a new report, Creating the New Economy – Business models that put people and planet first, aiming to reveal insights from the global community of Fair Trade Enterprises. The report was co-authored by WFTO, Traidcraft Exchange, the University of York and Cambridge University (Campaign landing page and press release.)

Podcast – Getting Veg-ucated. Brand On Purpose talks to Mark Cuddigan, CEO of Ella’s Kitchen and Head of Sustainability for Hain Celestial, about the benefits of becoming a B Corp, empty promises vs. actionable change, the ethical responsibility companies and consumers have to live sustainably, and why few companies are doing good even though doing good is good for business.

Solar plane explorer’s next mission: climate tech startups. Green Biz interviews Swiss explorer Bertrand Piccard, who was part of the first around-the-world solar-powered plane flight, about the progress of his work to find 1,000 profitable climate tech startups and his Solar Impulse Efficient Solution certification for business, and his plans to raise a $200 million fund with the principality of Monaco to fund startups working in this area.

A longer read – Circular Transition Indicators V1.0 – Metrics for business, by business. The Circular Transition Indicators, accompanied by an online tool, have been developed by 26 member companies of the World Business Council for Sustainable Development to help businesses assess their level of circularity, set meaningful goals and monitor progress.


Impact Investment

A longer read – Housing affordability: Social impact funds to solve the UK puzzle? IPE Real Assets considers whether social impact funds address the UK’s housing crisis and serve pension funds at the same time.

Three big achievements for CDFIs in the last year. Big Society Capital reviews the progress of its Community Investment Enterprise Facility (CIEF) launched in 2018. This £30m fund for CDFIs aims to help them meet the financing needs of underserved small businesses. The CIEF is supporting 3 CDFIs, which have deployed £9.5m to 189 small businesses.

Local Access – six places chosen to begin their journey to tackle inequality. Six areas across the UK will receive a share of a new £33m investment programme, Local Access, funded by Access – The Foundation for Social Investment and Big Society Capital, aimed at tackling inequality through boosting the social economy. The six places will have access to funds totalling £33m, £25m of which will be to enable local charities and social enterprises to access loans and other investment products.

Video – How your pension is probably fuelling climate change is a new short video report from the Thomson Reuters Foundation, making the case for looking at pensions as a means to take action on climate change.

A longer read – The Investment Association (IA) has published guidelines, Shareholder Priorities for 2020 – Supporting Long Term Value in UK Listed Companies, about investor expectations for UK listed companies in four areas that it’s members believe can be critical drivers of long-term value: Responding to Climate change; Audit quality; Stakeholder engagement, and Diversity. The guidelines note that for companies with yearends on or after 31 December 2019, IVIS, the IA’s Corporate Governance research service, will highlight where companies are not meeting these expectations.


Legal and Regulatory

Case studies from directors on section 172 duties – A guide to implementation is a new publication from ICAS, a global professional body for chartered accountants, presenting real life case studies from private and listed companies across a range of sectors and aiming to help directors apply their duty under s.172 Companies Act 2006, focusing on consideration of stakeholders other than just shareholders (press release).

The Equal Pay Bill has had its first reading in the House of Lords and been published (accompanied by an explanatory memorandum). The Bill would amend the Equality Act 2010, the Equality Act 2006, and the Employment Rights Act 1996, in order to:  

  • create a ‘Right to Know’ certain information where an individual may be subject to pay discrimination;
  • widen the scope of pay gap reporting;
  • lower the threshold for reporting to organisations with 100 or more employees; and
  • require employers to publish action plans to reduce relevant differences in pay.

For more on this topic in Europe, a resolution of the European Parliament has been adopted calling for more ambitious measures to close the continuing substantive gender pay gap across the EU (press release).

Ethnic Diversity Enriching Business Leadership – An update report from The Parker Review is a new publication based on research into ethnic diversity reporting by the FTSE 100 and 250, commissioned by the Financial Reporting Council, showing that these businesses are not yet on track to meet the Parker Review targets for BAME representation on boards (press release).

The European Commission has published a Proposal for a Regulation: Non-financial reporting by large companies (updated rules), which is open for responses until 27 February 2020. Current issues, which the initiative seeks to remedy with better reporting, include that: investors have insufficient information to take account of sustainability-related risks and opportunities, or of the social and environmental impacts of investments, companies may not be held to account for their impacts on society and the environment, and the EU Single Market risks not maximising its potential to deliver the European Green Deal and support the UN SDGs. (The Inception Impact Assessment provides further detail.) A further consultation on the details of the proposal is expected later in the year.

Workforce-related corporate reporting – Where to next? is a new report from the Financial Reporting Council, which finds a gap between the reporting that investors seek and what is being disclosed, and provides examples of how to close this gap. The report notes that investors want more understanding of workforce composition but also of the value of the workforce and how it relates to longer-term value creation, including considering the influence of company culture. (Press release and summary.)


Contacts

If you’d like to speak to us about our work in the Impact Economy, please get in touch.

If you’d like to speak to us about the Brief, please contact our editor, Phillippa Holland.


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.


All content on this page is correct as of February 7, 2020.