By Michael Ryland, President of GAIL, Asia Pacific Board Member

Impact law – capturing opportunities

There is an entrepreneurial gene in every Impact lawyer.  It is in our nature to look out for transactions and businesses that do things better – that seek a social or environmental benefit as well as a business return.   It is part of our skill set to look at the way the law – or the legal process – could be done better, not just for our client/company and the project but also for the Impact it has.

That entrepreneurial mindset is core to what we can achieve as Impact lawyers.  It is after all in the nature of Impact work that it adds value.  An Impact investment achieves a social return as well as a financial return.   Blended finance enables a project with a positive Impact to be undertaken that otherwise would be passed by.  Impact lawyers structure and scale investment solutions so that they contribute to sustainable markets and resilient societies. 

How can we add more value? – that kind of Impact ecosystem value – is a useful yardstick when we think about the work that GAIL is doing and seeking to do.

GSG Impact

I was prompted to think more about this entrepreneurial spirit when I had the privilege of attending the GSG Global Leaders Meeting in Kyoto in May on behalf of GAIL. 

GSG Impact is a strategic partner of GAIL.  It is the leading global network driving the growth of Impact economies across the globe, creating the infrastructure and incentives for capital to flow for the SDGs & climate goals. 

The meeting inspired many thoughtful discussions.  Three themes struck me as particularly relevant to GAIL: building strong, local Impact through Impact ecosystems; really engaging with the Climate and AI opportunities; and focussing on value creation.

GAIL’s regional structure lends itself well to supporting local Impact.  In each of our regions, we bring our regional resources to support the network of Impact lawyers in that region – sharing knowledge, connections, trends and energy – building the Impact legal professional expertise in that region.  We can and should also go further to support other aligned associations in the local and regional ecosystems: GSG’s National Partners, national or regional finance industry associations, accounting bodies and others – helping to ensure that the Impact ecosystem is legally robust and contextually grounded.

These are opportunities that we should not miss.

UN Global Compact

Climate change and climate adaptation have gone beyond topics for advocates and early adopters.  They are now everyday issues for businesses across the world. 

Impact lawyers have a role to play here.  Legal expertise is essential to ensuring that climate policies and adaptation strategies are not just aspirational, but actionable and enforceable.

I was reminded of this by the work that GAIL is doing with with the UN Global Compact through its Legal Council Working Group on legal and regulatory developments supporting sustainability and ESG.  This collaboration is being led by GAIL’s Immediate Past President, Connie Connolly.

One thing learnt from that work is that while the local regulatory infrastructure for sustainability reporting varies significantly across the world, the two standards recently issued by the International Sustainability Standards Board (ISSB) – IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures) – are quickly becoming the benchmark.

For many businesses these standards – whether mandatory or voluntary – are challenging.  Most businesses say they do not have sufficient resources allocated to collecting and analysing data.  They do not have the longitudinal databases they would like for targeted business decisions.  They have difficulty moving from compliance with risk management reporting to developing strategies out of those risks for business growth.

Businesses – and governments – are looking for ways to solve these challenges.  Those of us who work with the disclosure standards have an opportunity to think creatively about how governance and reporting systems can be refocussed, and how impact measurement and management can be designed and allocated in terms of legal obligations, to help businesses achieve – on a sustainable basis – the outcomes for which the standards are designed .

SVI True and Fair

That same issue arises on a broader basis in another GAIL project, the collaboration with Social Value International (SVI) on its True & Fair Project. 

This is an initiative hosted by SVI that challenges the way financial profit is calculated by ensuring that dependencies and negative impacts (hidden costs) are recognised within financial statements, rather than being confined to a non-financial report.

GAIL is working with SVI to help analyse the legal duties on company directors to incorporate hidden costs into financial statements when signing off those statements as “true and fair”, and to help raise awareness of those legal duties.  

In principle, the legal duties apply according to the relevant circumstances of the company.  In a world where recognised externalities are wide ranging, the obligation to address them could be correspondingly broad.  That is challenging.  But the potential upside is systemic.  Aligning fiduciary responsibility with long-term value creation has the potential to re-focus capital markets and revitalise governance standards globally.

The task of the Impact lawyer is therefore not just to analyse and explain the extent of the legal duties on company directors in this respect in that’s lawyer’s jurisdiction.  It is also to think about how the company can sustain that duty.  To be innovative in thinking about how that duty spreads – and can be recognised – across an industry sector, not just that company.  To work out how the positive systemic benefits can be harnessed and reflected in financial statements.   

Summit

I have run out of space to talk about the immense opportunities that Ai offers to the Impact lawyer. To discuss that, and to draw out so many other opportunities in Impact law work, you will have to attend the Summit in Mexico! For more details and how to register, click here.

Membership

Let me close this column with one more opportunity. Just as the Impact economy seeks to scale up Impact capital flows, GAIL also needs to scale up its support of the Impact ecosystem. If you see an opportunity to add a new member – in your jurisdiction or another – be sure to take that opportunity and invite them to join through the website!         

Michael Ryland