The Impact Economy Brief | 7 August

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

Our ‘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:

“Community development finance institution”

Editor’s Pick

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

A Growing, Resilient Alternative in a Global Crisis: Stakeholder Capitalism. B The Change considers recent Benefit Corporation IPO activity, and market signals of a renewed focus on stakeholder capitalism. For more, Christopher Marquis, Professor in Sustainable Global Enterprise at Cornell University, has published a short report on Managing Your Business in the Era of Stakeholder Management, about how lessons from the B Corp movement can enable a shift to stakeholder capitalism.

Impact Business

Our economic ‘operating system’ needs upgrading. The results of a poll, commissioned by B Lab, ReGenerate and Hanbury Strategy, have shone light on the UK public’s view of the role of business; the findings include that: 76% of respondents thought business has a responsibility to protect the natural environment; and 72% thought that business should have a legal responsibility to the planet and people, alongside maximising profits.

New B Corps – The UK B Corp community welcomes the recently certified Jamie Oliver Group, impact investment app tickr, and food waste-fighting business ODDBOX. Bates Wells was pleased to advise the board of directors of Jamie Oliver Group on how becoming a certified B Corp would change the nature and scope of their directors’ duties.

Ben & Jerry’s Showed America What Real Corporate Activism Looks Like. The Huffington Post reports on the ice cream retailer as a case study on corporate activism, describing the development of its activism over the decades.

The Employee Ownership Association’s CEO blog argues that making the case for employee ownership has never been more important, outlining some of its current initiatives to ensure that employee ownership is part of the ‘build back better’ agenda and an option for working towards a more inclusive economy.

A longer read – The purposeful business charity, Blueprint for Better Business, has published two new papers: Purpose for PLCs – Time for Boards to focus aims to move directors’ understanding of purpose beyond the framing of the FRC Guidance and outlines key questions for Boards to ask themselves about their ownership of company purpose (blog). And A working paper on Purpose and ESG aims to explain the relationship between ESG performance measurement and being purpose-led (blog).

A longer read – Corporate Environmental Impact: Measurement, Data and Information is a new paper from Harvard Business School’s Impact-Weighted Accounts Project, outlining a methodology for using publically available data to assign monetary value to companies’ environmental impacts, comparing findings across industries and assessing the level of correlation between companies’ ‘environmental intensity’ scores and some of the major ratings indexes. Sir Ronald Cohen, who chairs the Project, provides context for the paper in his article for the FT.

Impact Investment

Impact Investing won’t save capitalism. Alan Schwartz, founder, and Reuben Finighan, chief economist, at the Universal Commons Project write for the Harvard Business Review, arguing for a change in the ‘rules of the game’ in order to internalise externalities and bolster profitability in low-carbon investments.  

A new Task Force for Nature-related Financial Disclosures has been constituted to increase resilience in the global economy by redirecting flows of finance, at scale, towards nature-positive activities, and help financial institutions to better understand their risks, dependencies and impacts on nature. Those involved include BNP Paribas, AXA, World Bank, WWF, UNDP and UNEP FI, and the UK and Swiss governments. In collaboration with the corporate sector, reporting frameworks will be developed and made available worldwide. Business Green provides commentary on the announcement.

A longer read – Gender Smart Financing – Investing In & With Women: Opportunities for Europe is a new discussion paper from the European Commission looking at the lack of participation of women as recipients and decision-makers in investment, and noting the strong tendency of women entrepreneurs and investors to pursue positive impact goals.   

Podcast – Impact Alpha talks to Nick O’Donohoe, CEO of  CDC Group, the UK’s development finance institution, about risk, liquidity and catalytic capital in emerging markets (SpotifyAppleGoogle).

A longer read – The Big Society Trust (BST) has published its first quadrennial, independent review of Big Society Capital (BSC) and its effectiveness, as part of a new process commissioned by BST to be carried out every year (on rotation) on one of the four companies it oversees (press release and BSC’s response to the review).

Affordable credit CIC Fair for You secures £7.5m in first-time quasi equity deal. Pioneers Post reports on seven UK social investors coming together to provide financing to Fair for You, in the form of a perpetual bond, providing quasi equity capital of £7.5m. Bates Wells was pleased to have supported some of the investors in this transaction.

Roles Foundations Play in Shaping Impact Investing. David Wood PhD, director of the Initiative for Responsible Investment at the Hauser Institute for Civil Society at Harvard’s Kennedy School of Government, writes for the Stanford Social Innovation Review, identifying key roles philanthropic foundations play in impact investing and calling for foundations to play a greater role in critiquing the system of finance itself.  

A longer read – Investment: The Pillars of Stronger Foundation Practice is a new report from the Association of Charitable Foundations’ “Stronger Foundations” initiative, looking at how investments can be more closely aligned with a foundation’s mission and grant-making (press release).

Legal and Regulatory

The FRC’s Financial Reporting Lab has launched a call for participants: reporting on stakeholders and Section 172 disclosures. The project aims to identify how information about stakeholders can be reported most effectively, by examining existing practice and understanding investors’ needs.

A longer read – Study on directors’ duties and sustainable corporate governance – Final Report is a new research publication prepared by EY for the European Commission DG Justice and Consumers. The report considers the impacts of a range of possible EU-level, ‘soft’ and ‘hard’ legal and regulatory interventions designed to address the root causes of short-termist value creation. The work is part of the Commission’s Sustainable Corporate Governance initiative to improve the company law and corporate governance regulatory framework by embedding long-term, socially and environmentally sustainable value creation. The Commission is open to feedback on the roadmap for the initiative until 8 October 2020.

CDSB Framework – Application guidance for climate-related disclosures is a new guide from the CDSB, designed to help businesses using the CDSB Framework to disclose material climate-related information in mainstream corporate reports. The guide is the first in a series of supplements on nature-related financial disclosure, with “Water Guidance” due early next year (press release).

The EU Commission has published a Summary Report of the Public Consultation on the Review of the Non-Financial Reporting Directive, setting out the key messages from the responses and analysing the response data (see the ‘Consultation outcome’ section to download the document).

A number of responses to the EU Commission’s Renewed Sustainable Finance Strategy consultation have now been published, including from ESMAThe Investment Association and ICAEW.

Low carbon transition – Decarbonisation of the UK economy and green finance inquiry relaunched. The Treasury Committee is reopening this inquiry in order to address questions including whether: HM Treasury’s support packages to business should distinguish between companies based on how much they pollute; HM Treasury should be directly funding green infrastructure as part of its coronavirus spending package; and HM Treasury should change policies due to coronavirus in order to facilitate the transition to meeting Net Zero (inquiry landing page).

Does the UK have an international duty to adopt a mandatory due diligence obligation law on business and human rights? Dr. Dalia Palombo, Senior Research Fellow at the Institute for Business Ethics at the University of St. Gallen, writes for CORE to provide a short summary of the arguments from her new book, in response to this question.

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 August 7, 2020.