The Impact Economy Brief | 2 October

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:

“Impact-weighted accounts”

Editor’s Pick

If you only have a few minutes of quiet this week, we recommend…
How to Measure a Company’s Real Impact. Sir Ronald Cohen, chair of the Impact-Weighted Accounts Initiative and the Global Steering Group for Impact Investment, and George Serafeim, professor at Harvard Business School, write for the Harvard Business Review to discuss the potential of greater business impact transparency in investor decision-making, tax policy-making and consumer choice, so that profit and impact set the ‘rules of the game’. The authors note that next year the Impact-Weighted Accounts Initiative at Harvard will publish its research on the cost of product and employment impacts, complementing research published this year on the cost of the environmental impacts of 1,800 companies based on publically available data.

Impact Business

The US-based business-led network, Imperative 21, has launched RESET, a long-term campaign to raise awareness around the necessity of, and opportunity for, economic system change, in order to create a more just economy that works for everyone and for the long-term. Imperative 21 is stewarded by B Lab, The B Team, Chief Executives for Corporate Purpose (CECP), Common Future, Conscious Capitalism, The Global Impact Investing Network (GIIN), JUST Capital, and Participant. For more, Nell Derick Debevoise, Founder and CEO of certified B Corp Inspiring Capital, writes for Forbes about the launch of the campaign.

Webinars – esela – The legal network for social impact is hosting its second series of webinars this year, including two sessions this month: A Legal Framework for Impact: Investing for Sustainability Impact, 7 October 2020, considers ‘A Legal Framework for Impact’, a major research project commissioned by the PRI, UNEP FI and The Generation Foundation to examine how investors in major jurisdictions can manage their fiduciary and impact duties within existing legal frameworks. Time for a Reset: Shaping Economic and Legal Foundations for the Future, 14 October 2020, will explore the imperative for economic system change, what this looks like in practice, and what legal foundations are needed for the system to be reset. Recordings from past webinars can be viewed on the esela YouTube channel.

New measures to deliver value to society through public procurement. The government has announced new measures intended to help SMEs and social enterprises demonstrate their social impact as part of their bids for government contracts, focusing on social value in areas including fighting climate change and reducing waste, and driving equal opportunity including reducing the disability employment gap and tackling workforce inequality.

The Building a Better Economy Policy Challenge is a global fourth sector policy “hackathon” to accelerate recovery toward an inclusive and sustainable economy. The Challenge calls on innovators, experts and organizations from around the world from policy, business, finance, law, economics, philanthropy, academia, civil society, development, technology, design and other fields to come together to develop actionable policy solutions to critical issues facing societies in the wake of the COVID-19 crisis. Participants from around the world are invited to submit challenges to be solved, or to take part in developing innovative solutions that harness decades of innovation by pioneers who have been reimagining and remaking our systems of finance, enterprise, policy, assessment, production and consumption to better serve the common good. Solutions will be presented to governments, showcased alongside the 75th United Nations General Assembly and introduced at the G20. 

From Shareholder Primacy to Stakeholder Capitalism – A Policy Agenda for Systems Change is a new joint publication from B Lab and The Shareholder Commons, setting out policy proposals for US legislative and regulatory reforms to replace shareholder primacy with Stakeholder Capitalism and benefit governance.

Alongside publicly traded companies Bonduelle, Gerdau, Givaudan and Magalu, B Lab has launched its B Movement Builders programme for multinational, public companies to come together to lead systems change alongside, and in support of, the B Corp community (press release, and author and professor at Cornell, Christopher Marquis, provides commentary on the announcement in Forbes).

Social Enterprise UK has published its Buy Social Corporate Challenge – Year 4 Impact Report, showing that large corporates have spent over £90m with social enterprise suppliers since the initiative’s launch, creating over 1,200 jobs, and presenting key findings on the ‘social procurement’ marketplace (report landing page).

A view from the US –50 years later, Milton Friedman’s shareholder doctrine is dead.  Colin Mayer, professor at the University of Oxford, Leo E. Strine Jr., former chief justice and chancellor of Delaware, and Jaap Winter, partner at Phyleon Leadership and Governance and professor at Vrije Universiteit Amsterdam, write for Fortune to recommend the Public Benefit Corporation as the basis for the American corporation.

Impact Investment

Crucial months ahead for future of EU social enterprise funding. Pioneers Post reports from the recent EVPA Annual Conference at which Ann Branch, head of unit at the European Commission’s directorate for Employment, Social Affairs and Inclusion, spoke about discussions on the EU budget for 2021-27, and provides commentary on the role of EU funding in the social economy.

A longer read – Levelling up our communities: proposals for a new social covenant is the new report to government from Danny Kruger MP, including a section on ‘Philanthropy and social investment’ and making a number of recommendations, including a new £500m Community Recovery Fund to help civil society during the current crisis, financed through repurposing the National Fund, and a £2bn endowment, the Levelling Up Communities Fund, for investment in long-term, community-led transformation in left-behind areas, financed through funds released from dormant accounts and financial products (report landing page).

Big Society Capital has published Evaluation of the Community Investment Enterprise Facility – First Annual Report, a longitudinal evaluation from Sheffield Hallam University looking at the performance of the facility, which aims to create greater understanding of the financial and social impact of Community Development Finance Institution (CDFI) lending and test models of funding for CDFIs to attract other mission-driven investors. For more, Holly Piper, Investment Director at Fair4All Finance, shares her thoughts on the impact of lockdown on the affordable credit sector.

Managing for Impact – What we have leant and what comes next. Snowball, an impact-focused investor that aims to catalyse change in the investment industry and ensure that every investment prices in environmental and social impact, has published a new report analysing the additional impact that the fund managers in its portfolio bring to the investments in their portfolios. The report shares Snowball’s methodology for assessing manager impact in both the public and private markets, including how it has utilised developing best practice, particularly the work of the Impact Management Project (report landing page).

What a Task Force on Nature-related Financial Disclosures (TNFD) will achieve. Nicky Chambers, Programme and Impact Director for Global Canopy, a non-profit promoting a deforestation-free economy, writes for Responsible Investor to explain how the TNFD could help the finance industry fight the current natural crises the world faces.

Legal and Regulatory

The Chancery Lane Project has published the third edition of its Climate Contract Playbook, a collection of precedent contract clauses for use by lawyers and businesses, designed to help fight climate change, and the second edition of the accompanying Glossary.

A longer read – Transparency in supply chains consultation – Government response. The government has published its response to the transparency in supply chains consultation, setting out new measures to hold businesses and public bodies accountable for tackling modern slavery (press release and consultation landing page). For more, Bates Wells has published a short summary, following the announcement.

Women make up more than a third of all board members across the FTSE 350 for the first time, reports the September press release of the Hampton-Alexander Review, published on the Gov.UK website. However, the press release indicates more work is needed, stating that more than 4 in 10 FTSE 350 companies have failed to reach the 33% individual board target. The Review’s Leadership Gender Data Submission Portal will open next month. For more, the Cranfield School of Management has published The Female FTSE Board Report 2020 – Taking Targets Seriously, a research report sponsored by EY, looking at the current state of gender diversity at board level.

Statement of Intent to Work Together Towards Comprehensive Corporate Reporting. Five framework and standard-setting institutions, the CDP, the Climate Disclosure Standards Board, the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board, have published a joint statement envisioning what’s necessary to create more comprehensive (financial and non-financial) corporate reporting, and declaring their intent to drive towards this goal by working together and engaging with key actors (press release).

Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation is the final white paper from the World Economic Forum, in partnership with Deloitte, EY, KPMG and PwC, setting out “Stakeholder Capitalism Metrics” and disclosures that can be used by companies to align their mainstream reporting on performance against ESG indicators and track their contributions towards the SDGs. The white paper sets out ‘core’ and ‘expanded’ metrics that represent standard and more advanced ways of measuring and communicating sustainable value creation, drawing on existing standards and frameworks, including the TCFD recommendations (press release). For more, the GRI and the IIRC respond to the publication (here and here). 

Corporate Transparency and Register Reform. The government has published its response to the consultation on options to enhance the role of Companies House and increase the transparency of UK corporate entities. The new measures announced are aimed at combatting fraud and money laundering, and increasing confidence in the reliability of information about companies on the register. The new measures include identity verification for directors, PSCs and anyone filing company information and reforms to increase Companies House powers of information scrutiny (press release and consultation landing page).

Louise Smyth is appointed as interim Regulator of Community Interest Companies, and the Office of the Regulator of Community Interest Companies publishes its Annual Report 2019 – 2020.

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 October 2, 2020.