The Role of Law and Lawyers in the Impact Revolution.
Melissa Gilmour, Marketing Director, Project Heather
Studies of history’s great revolutions show they occur when fundamental challenges are faced which may be a consequence of local or of global processes, to which institutional structures and the psychological outlook of the populations have rendered them unable to adapt themselves in the time available (Why Revolutions Happen, by Vladmir Mau). Even the most optimistic scenario for climate change is not good: our planet and society is at tipping point.
On Friday 12 April, circa 150 lawyers convened at the ESELA Annual Conference 2019 in London to address the role of law and lawyers in the impact revolution. ESELA is the Legal Network for Social Impact. At the conference, practitioners from the UK and around the globe gathered to discuss how law could play a part in helping us achieve the United Nations’ Sustainable Development Goals (SDGs).
A speech by Amit Bhatia CEO of the Global Steering Group for Impact Investment had the room of lawyers loudly applauding at the proposition they were an early part of an ‘impact revolution’. While I acknowledge there are impact practitioners that have been grinding a call to action for over a decade to often dead ears, I was encouraged to hear that a message of the need for real change is now being embraced by professional lawyers. A serious discussion around company law and its relationship with achieving impact goals is a major step toward addressing the challenges being faced in the transformation of business to exist solely as a force for good.
The message was clear. A societal contract has been broken, where many businesses no longer serve society for the reasons they were created. However, businesses could work together to solve environmental and societal problems if their underlying ‘purpose’ is upheld and articulated. Businesses currently serve to pay taxes and create jobs, but with the rise of international conglomerates and a global decrease in employment since the financial crisis, we have seen a moral decline in the market of capital and profit. The highest purpose of business needs to become one where the ‘invisible heart sits with the invisible hand’ said Bhatia.
Another rousing speech was delivered by Colin Mayer CBE, who said SDG goals represent the critical element of measuring impact and bring impact into the centrefold (and as a sideline later on added that there was a Nobel prize waiting for the person that created technology to assist us in being able to measure that). Colin is the Peter Moores Professor at the Said Business School at the University of Oxford and leads the British Academy enquiry into “The Future of the Corporation” and author of “Why the Corporation is Failing Us.”
Mayer said, ‘Finding profitable solutions of people and planet needs to become the purpose of business’ and to achieve this we need to reform corporate law and invoke a radical reformation on our notions of business, its roles and responsibilities, and the way business operates.
Restoring ‘trust’ in business is the most important issue of this decade, according to Mayer. There are many reforms in progress — he referred to France and its revisit of corporate purpose with proposed amendments to company law — but we need to move faster. He said we need to recognise that those companies which perform public functions, such as schools and transport, should be aligning corporate purpose with public interest as opposed to profit. Ownership underpins all of this in terms of influencing business purpose. The room was urged to review corporate governance and to go well beyond environmental, social and governance law (ESG) which in Mayer’s view had actually failed the cause by allowing for a sense of apathy and misdirection (possibly news to many lawyers in the room and the advisory community as a whole.) He said we need to start creating measures where data has assurances.
Mayer summed it up when he said,
“The purpose of business should be to deliver profitable solutions to the problems of people and planet, not to profit from the problems of people and planet.”
If you are interested in following Mayer you can see one of his presentations here from another occasion at a John Cass Foundation Lecture. I recommend listening to him.
Mayer believes public markets could be the vessel to bring back trust and we discussed the work Project Heather is undertaking with building a Scottish Stock Exchange during the Q&A. The Scottish Stock Exchange will be the world’s first Recognised Investment Exchange for companies that could articulate a positive purpose toward solving society and the planets problems. Mayer backed the project saying it was a very important initiative and took the concept of trust back to localisation.
He explained how local stock exchanges which once ran in Edinburgh, Dundee, and Aberdeen exchanges operated as local branches until 1971 and were very good at promoting trustworthy organisations naturally because they were taking money from the local — that is, their own community. There were many examples back in those days where regulation was not required because there was trust. He said regulation is introduced when there is a demise of trust and, in his own words, because restoration of trust is so important, so is the initiative of the Scottish Stock Exchange.
There was some debate over the word ‘revolution’. An audience member from Argentina said this was not a word to be used lightly and the word ‘evolution’ might be more appropriate. Revolution implies a major shift change of traditional structures and sacrifice from a large proportion of society… a change in the status quo. Marie Mackay from the British Institute reiterated among other statistics that the 26 richest billionaires own as many assets as the 3.8 billion people who make up the poorest half of the planet’s population (c. Oxfam). There was discussion around how this is a fact that a future generation will view in the same way that we struggle to comprehend how slave trade was ever justified.
All in all, it is time for many of us to start taking some risks and manifesting real change in business practice . With trillions flowing into impact investing it’s hard to think what they might be right now but reframing business for the 21st century — including the law — might upset some areas of the status quo. With the explosion of growth in the impact investing space I am sure the ESELA community sees an opportunity to profit from solving some of the societal planets problems but there was also a genuinely strong concern coming from these practitioners that the world needs help urgently solving burning problems. I hope many other advisory communities can start to do the same so that impact moves from academic thinking into the practical sphere of wider implementation as fast as it possibly can.
To that end, we are seeking lawyers to work with us on building a Scottish Stock Exchange based on 21st Century Values: Scottish based, global facing, and impact focused. If you wish to learn more about Project Heather please visit www.projectheather.scot.
A Scottish Stock Exchange aims to be the new beating heart of stock exchanges. A fresh platform for impact companies launching in 2019. Project Heather is a catalyst for innovation, sustainable growth and improved public services. We will build a capital markets destination for impact companies everywhere. Impact investment is a proven 21st century model for capital markets and will be the key tool that the Scottish Stock Exchange will use to bring about change for the first time for public markets.
