The Impact Economy Brief

Talk the Talk

Impact Economy

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:

“Transition bond”

Editor’s Pick

If you only have a few minutes of quiet this week, we recommend…
Ex Bank of England boss Carney: impact investors are alchemists for the world’s ‘insurmountable problems’. Pioneers Post reports on Mark Carney’s address to the Impact Investing Institute’s first year anniversary conference, at which he described a clear path for mainstream investing to move from negative screening to investing in companies creating positive impact.

Impact Business

YPO and B Lab announce global impact partnership. YPO, a global leadership network of over 29,000 CEOs, and B Lab will combine their resources, knowledge and networks, collaborating to produce educational programming and events featuring founders from the B Lab Global Network, global ambassadors and other well-known leaders, and make introductions between YPO members and the B Lab Global Partner Network, for local events and insight into the B Corp certification process.

A longer read Leading with a sustainable purpose. The Cambridge Institute for Sustainable Leadership has published a briefing paper on how to align purpose, strategy and sustainability, presenting 10 principles with accompanying practice notes and ‘pointers’ for tangible actions, and drawing on the experiences of sustainability leaders from Unilever, Ingka Group (IKEA), Interface and DSM (landing page and press release). 

Patagonia’s reversible poem ad is a check on runaway Black Friday Cyber Monday spending. Fast Company reports on B Corp clothing brand Patagonia’s call to eschew Black Friday consumerism in a full page ad in The New York Times, as part of its “Buy Less, Demand More” sustainability campaign. Other fashion businesses have taken a similar stance, including B Corp Allbirds. Also coinciding with Black Friday, the New Weather Institute, climate charity Possible and the KR Foundation have published a short report based on academic literature, Advertising’s role in climate and ecological degradation, about the indirect ecological impact of encouraging overconsumption, as part of the ‘Badvertising’ campaign.

It takes more than a Diversity, Equity & Inclusion workshop to become an inclusive organisation. Nishita Dewan, founder of CollaboratEQ, writes for B Lab’s Reinventing Business blog series, describing how to go deeper in diversity, equity and inclusion practices as part of a long-term journey of participatory development for an organisation.

Podcast – Reasons to be Cheerful: To B(Corp) or not to B: a different way of doing business. Ed Miliband and Geoff Lloyd interview Paul Lindley, founder of Ella’s Kitchen, about what he’d change in the economic system and UK company law, and Lenore Palladino, Assistant Professor at the University of Massachusetts Amherst and Fellow at the Roosevelt Institute, about the problems with shareholder primacy and buy-backs, and how to embed a stakeholder approach (Spotify; Apple; Google).

A longer read – The UK Government has published its Ten Point Plan for a Green Industrial Revolution, noting the potential for up to £42bn of private investment by 2030 into energy, buildings, transport, innovation and the natural environment, as part of a plan to ‘build back better’, support the creation of green jobs and accelerate the UK’s path to Net Zero (press release). The paper states that further proposals will be announced in the next year, starting with an Energy White Paper in 2020. For more, Edie provides commentary on responses to the publication.

A longer read Building more open business is a new report, commissioned by the FRC, looking at the experiences of LGBTQ+ people progressing into senior leadership in business, including what barriers this group faces and whether good practices and procedures can be identified to support LGBTQ+ progression (press release).

A longer read Accounting for Organizational Employment Impact. The Impact-Weighted Accounts Initiative at Harvard Business School (IWAI) has published further work on assigning monetary values to businesses’ ESG impacts. This paper looks at employment impacts, and applies IWAI’s methodology to four major US companies (Intel, Apple, Costco and Merck). Bloomberg comments on the publication (‘How Wrong Was Milton Friedman? Harvard Team Quantifies the Ways’) and IWAI’s webpage carries its other recent publications on accounting for product impact, in the Consumer Finance Industry, the Airlines Industry and the Consumer-Packaged Foods Industry

Impact Investment

What is transition finance? Raconteur reports on the development of financing for transitioning the heaviest polluters onto a greener path, rather than blacklisting “bad” companies, noting the need for and challenges of this approach.
Big Society Capital announced its partnership with Schroders to launch Schroder BSC Social Impact Trust plc, a £100m investment trust investing in private market impact funds, focusing on high impact housing, debt for social enterprises and social outcomes contracts.
The Blue Impact Fund, managed by Finance Earth and developed in collaboration with WWF, has launched with the aim of supporting UK innovation for the ‘blue economy’ through accessing private capital. Private Equity Wire reports on the launch. 
The Secret Club for Billionaires Who Care About Climate Change. Bloomberg reports on the work of non-profit Creo Syndicate (‘Clean, Renewable and Environmental Opportunities’) supporting private capital to play a leadership role in addressing environmental challenges, by bringing together family offices and other long-term investors.
Webinar – Getting Better Through Benchmarks, 9 December 2020, will feature panellists from the Impact Management Project, 60 Decibels, B Lab and the World Benchmarking Alliance, discussing how benchmarks are established and why they are key to continuous improvement and integrity in impact management, for investors and companies seeking a higher standard of social and environmental performance.
ConsultationMethodology for Standardizing and Comparing Impact Performance. The Global Impact Investing Network has published for consultation its proposed methodology for analysing and comparing standardised impact data, at investment level and across investment opportunities, in order to better integrate impact and investment management. The consultation will be open until 31 January 2021 (landing page).
The Government has set out its ambitions for the future of UK financial services, including the first Sovereign Green Bond and mandated TCFD-aligned disclosure for a significant proportion of the economy by 2025. The Interim Report of the UK’s Joint Government-Regulator TCFD Taskforce finds that, despite significant support for the TCFD recommendations, limited progress is being made on reporting alignment, and summarises the implementation approach for mandated TCFD-aligned reporting by type of organisation (landing page). For more, the FCA’s Executive Director of Supervision (Retail and Authorisations) recently gave a speech on social purpose in the finance industry, noting a growing consensus that healthy cultures are purposeful, diverse and inclusive, and stating that financial services are well positioned to purposefully support and benefit from some of the key challenges facing society.

Legal and Regulatory

The FRC has published a Review of Corporate Governance Reporting, in the first year in which all UK premium listed companies report under the 2018 UK Corporate Governance Code. Findings include that, whilst reporting on purpose and culture and stakeholder engagement has improved, more work is required to define purpose, embed culture and explain how stakeholders are considered and diversity will be advanced (press release). The FRC has also published findings from a thematic review of climate-related considerations, noting limited evidence of climate considerations influencing business models and company strategy, and that companies are not detailing how their progress towards Net Zero targets will be monitored and assured (press release).
The Change We Need: Model legislation to promote responsible long-term investment by institutional investors. ShareAction has proposed legislation to stipulate that the fiduciary duty of investors to act in the best interests of their beneficiaries includes environmental and social considerations. The Bill proposes a new UK Council for Investor Due Diligence, which would require investors to explain how they mitigate complicity in serious human rights violations or environmental crimes by investee companies, and enforcement powers under s.172 Companies Act 2006 where directors fall below a reasonable standard (press release).
Investing with Purpose: placing stewardship at the heart of sustainable growth is a new report from the HM Treasury-led Asset Management Taskforce, a group of UK investment managers, stakeholders and regulators, supported by the Investment Association. The report sets out 20 recommendations for integrating stewardship into the investment process and, more broadly, across the economy, to develop behaviours that will lead to sustainable returns and long-term value creation for clients, including through changes to company law (press release).
Consultation – The European Commission has published a draft delegated act pursuant to the Taxonomy Regulation, which creates a classification system for sustainable economic activities. The draft delegated act sets out technical screening criteria for activities that substantially contribute to two of the objectives in the Taxonomy Regulation (without harming the other objectives): climate change mitigation and adaptation. The consultation closes on 18 December 2020.
A longer read – MEPs want businesses to be sustainable in the long-term. The Legal Affairs Committee of the European Parliament (JURI) has approved a draft report on sustainable corporate governance that calls for the Non-Financial Reporting Directive to cover more businesses and be more comprehensive, and for a legislative proposal to ensure that those managing companies have collective responsibility for defining, disclosing and monitoring a corporate sustainability strategy, which covers a range of stakeholder issues and measurable targets (procedure file). Subsequently, a further draft JURI report on corporate due diligence and corporate accountability has been published (awaiting vote), providing recommendations for the text of a new Directive on mandatory supply chain due diligence (procedure file). For more, the Business & Human Rights Resource Centre has published a compendium of views from global stakeholders, including H&M, Shift, and the British Institute of International Comparative Law, on mandatory human rights and environmental due diligence.
The World Benchmarking Alliance has published the 2020 results of the Corporate Human Rights Benchmark measuring 230 global companies on their human rights performance, across five sectors at high risk of negative human rights impacts, and finding some improvement but a disconnect between companies’ stated commitments and performance (key findings report and ranking).
International lawyers draft plan to criminalise ecosystem destruction. The Guardian reports on a new initiative, convened by the Stop Ecocide Foundation, to draft a legal definition of “ecocide” as a potential international crime. The initiative is chaired by Prof Philippe Sands QC, University College London, Matrix Chambers and Florence Mumba, a former judge at the International Criminal Court.

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 December 4, 2020.