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.
If you would like to receive the Brief each month, you can sign-up here.
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:
“Racial Justice Lens Investing or Racial Equity Investing”
If you only have a few minutes of quiet this week, we recommend…
Not just a marketing stunt: startup Earth Day campaigns worth paying attention to. Startup focused news source, Sifted, highlights organisations taking climate action, including Swiss carbon-capture firm Climeworks using a membership offer to shift more carbon, German carbon accounting platform PlanA.Earth’s EU petition for tougher action on greenwashing, and ClientEarth’s new investigation, ‘The Greenwashing Files’. For more, the B Corp Climate Collective has partnered with Oxford University to curate the B Climate Tools Base, a set of tools to guide businesses toward net zero emissions by 2030 while taking a human-centric, climate justice-oriented approach.
B Lab Europe Press Release on EU Sustainable Corporate Governance. B Lab Europe, in partnership with The Good Lobby and 60 B Corps, has published a response to the EU Commission’s consultation on Sustainable Corporate Governance, calling for EU-level legislation that goes beyond existing environmental sustainability requirements and shifts from voluntary to mandatory action.
The Ethics of Diversity is a new ‘board briefing’ from the Institute of Business Ethics. It summarises key recommendations from the Institute’s report published last year, covering aspects such as board evaluation, communications, appointments and stakeholder engagement, as well as calling for boards to recognise inequalities and racism as system risks to the economy, and diversity and inclusion as opportunities for long-term change.
Raconteur has published its 2021 Sustainable Business report, featuring articles covering topics including collaboration for improving sustainability, opportunities for positive impact within the built environment, sustainability reporting, B Corps and authentic corporate purpose (landing page).
A longer read – The European Confederation of Directors Associations (ecoDa) has published its updated Corporate Governance Guidance and Principles for Unlisted Companies in Europe, which discusses various aspects of building a governance strategy, including corporate purpose and stakeholder engagement in building long-term sustainability and providing a “mandate to operate” in relation to businesses’ impact on wider society. For more, the Institute of Directors endorses the new ecoDa guidance.
The answer to the European Super League fiasco? The Better Business Act. Bates Wells’ Benjamin Thomas gives his thoughts on the issue at the heart of the European Super League: shareholder primacy; and why we need the Better Business Act.
A view from the US – An Urgent Call to Biden-Harris Administration: Create White House Initiative on Inclusive Economic Growth. The US Impact Investing Alliance, B Lab and a coalition of 50 impact-oriented organizations are calling for the creation of a White House Initiative on Inclusive Economic Growth to coordinate federal policies that will reshape the US economy toward stakeholder capitalism. For more, Forbes reports on the announcement.
A longer read – Social Enterprise UK – One Year On: The effect of COVID-19 on the social enterprise sector is a report published by Social Enterprise UK, based on publicly available data and information from its monthly survey of social enterprises, looking at how social enterprises have performed over the last year relative to SMEs as a whole, and what the sector needs to maximise its potential in recovery. Pioneers Post reports on the findings.
Big Issue Invest launches Diversity, Equality, and Inclusion Measurement Tool. Big Issue Invest has designed a Diversity, Equality, and Inclusion Measurement Tool to support organisations to measure their diversity characteristics internally and within the different groups that use their services.
Debt-for-equity: a social economy response to the Covid debt burden on SMEs. Nick Temple, CEO of Social Investment Business (SIB), writes for Pioneers Post, making the case for transitioning at-risk, viable private businesses into employee or community ownership at scale, and explaining SIB’s Debt-for-Equity campaign.
Big Society Capital appoints Stephen Muers as CEO. Stephen has been at Big Society Capital since 2016, as Head of Strategy and Market Development and, more recently, as interim CEO since May 2020.
Webinar – Place-Based Impact Investing (PBII): Focusing Capital on the Opportunity of Place, 26 May 2021. The Good Economy, the Impact Investing Institute and Pensions for Purpose will host a launch event for the PBII White Paper, including discussion of the project’s findings, recommendations and next steps. Panellists will include Karen Shackleton, founder of Pensions for Purpose and Non-Executive Chair at Resonance, Mark Hepworth, Research and Policy Director and Co-Founder at The Good Economy, and Sarah Teacher, Executive Director at the Impact Investing Institute.
A longer read – The Treasury Committee, appointed by the House of Commons to examine the expenditure, administration and policy of HM Treasury, HMRC and associated public bodies, has published a new report, Net Zero and the Future of Green Finance. The report sets out recommendations, including that the Treasury should: work with the FCA to ensure that the regulator has the powers and priorities to prevent ‘greenwashing’ of financial products; report regularly on the proportion of pension holders in DC schemes who remain in default funds and by how much those funds align with Net Zero; and help ensure that pressure is maintained for consistent and rapid implementation of mandatory climate-related financial disclosure requirements (press release and summary).
The PRI has published new guidance, Understanding and aligning with beneficiaries’ sustainability preferences, intended to help asset owners incorporate beneficiary sustainability preferences as a fundamental aspect of investment strategy, with an accompanying survey template. For more, the PRI has also published an Investor Briefing on EU regulation on sustainability-related disclosures in the financial services sector, which sets out key requirements under the Sustainable Finance Disclosure Regulation (SFDR) that seeks to create disclosure requirements for sustainability risks.
A view from the US – Flipping the Stock Exchange Model on Its Head to Support Long-Term, Multi-Stakeholder Economic Success. Cornell University professor Christopher Marquis writes for SOCAP Digital, interviewing Michelle Greene, President Emeritus and Board Member of the Long-Term Stock Exchange, about listing standards, how a long-term investment horizon plays into sustainable investment, and how short-termism undermines innovation.
Legal and Regulatory
The FCA has published new webpages:
- Climate change and sustainable finance, setting out details of its sustainable finance strategy and regulatory approach to creating an environment in which market participants can manage the risks of moving to a more sustainable economy, and capture opportunities to benefit consumers; and
- Climate-related reporting requirements, outlining the FCA’s TCFD-aligned reporting requirements, which companies and firms fall in the scope of the rules, and its plans for extending the requirements.
The Climate Disclosure Standards Board (CDSB) has provided an update on its work on Connecting biodiversity with financial capital, through new guidance to help companies address biodiversity and land use-related financial reporting, while noting that recent CDSB research found that less than half of Europe’s largest companies include reference to the topic in their reports.
A longer read – The EU Commission has published a new package of regulatory proposals focusing on sustainable investment and corporate reporting, building on existing measures including the EU Taxonomy. The Commission is putting forward the EU Taxonomy Climate Delegated Act, a proposal for a Corporate Sustainability Reporting Directive (revising the Non-Financial Reporting Directive) and amendments to delegated acts to better reflect sustainability preferences in insurance and investment advice and sustainability considerations in product governance and fiduciary duties (landing page and press release).
A longer read – The European Parliament’s Committee on Legal Affairs has adopted its own-initiative report on the liability of companies for environmental damage, recommending additional measures to ensure EU regulatory standardisation and increase public confidence in the effectiveness of EU laws to prevent and remedy environmental damage, whilst balancing corporate interests (summary and procedure file).
Compliance with reporting of pay ratio requirements. The High Pay Centre has written to the FRC, highlighting findings from its research into compliance with the ‘pay ratio’ disclosures mandated by the Companies (Miscellaneous Reporting) Regulations 2018 and, in particular, the incidence of non-compliance.
In response to the BEIS Committee’s report on Uyghur forced labour in Xinjiang and UK value chains, published last month, a coalition of civil society organisations that aim to strengthen corporate accountability for human rights abuses and environmental damage has published a joint response, supporting the Committee’s conclusion that the Modern Slavery Act is not fit for purpose and highlighting calls from across sectors for new legislation to require companies to undertake human rights due diligence processes (press release).
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 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 May 7, 2021.