Business Integrity for Impact Lawyers: The Role of Anti-Corruption Obligations in Impact Investing

Hosted by British International Investment and GAIL UK


This discussion brought together an expert panel of impact investors, in-house counsel and business integrity specialists, to focus on how lawyers can help to operationalise and implement a business integrity risk management programme in practice.

Impact investors play a critical role in international efforts to meet the United Nations Sustainable Development Goals and have ambitious goals to drive positive economic, environmental and social change through investment. Investing with integrity is fundamental if impact investors are to meet these goals. Business integrity is central to fulfilling a development mandate, and should not only be a matter of compliance. Without this insight, the positive forms of impact that investors seek are in jeopardy.

The discussion identified where business integrity and anti-corruption obligations reside in transaction legal documentation and highlighted some of the practical limitations to operationalising business integrity obligations in legal documentation (including for example issues around enforceability and pushback).

The panel also discussed proactive risk management approaches, including going beyond basic legal monitoring requirements, exploring the role that impact lawyers can play in preserving impact in this context.

The panel discussed the 2022 report by Transparency International, supported by British International Investment, on Investing with Integrity: The Benefits and Challenges of Integrating High Business Integrity Standards in Impact Investments. While there is existing guidance on business integrity standards, this report is the first to explore in detail the realities of implementation in impact investing in emerging and frontier markets. It illustrates the challenges which arise and how impact investors can best respond.

This event was for GAIL members and their guests.


In 2022, Transparency International published a report, commissioned and co-produced by British International Investment (BII) titled Investing with Integrity – The Benefits and Challenges of Integrating High Business Integrity Standards in Impact Investments.  The report aims to explore the role of business integrity and anti-corruption initiatives in the context of impact investment and specifically addresses the challenges of managing corruption and fraud risks in emerging markets, notably South Asia and Africa.

BII itself operates within a dedicated business integrity team, focusing on pre-investment due diligence, portfolio management, and ongoing monitoring to mitigate financial crime risks, regulatory risk, political risk, and reputational risk. Beyond traditional due diligence, BII’s business integrity team conducts in-depth analyses of companies’ internal control environments, emphasizing capacity-building to handle corruption and other integrity risks. The team provides extensive support through training programs, guidance notes, and toolkits.

Recognising the need to align these efforts with the broader mandate of impactful investments, BII’s  collaboration with Transparency International aims evaluate the link between anti-corruption obligations within the context of  impactful investments. The discussion explored key report findings, with a particular view to the role of impact lawyers in business integrity risk management for impactful investments.

Key Report Findings

  • The report urges impact investors to consider business integrity as central to their development mandate, emphasising the need to avoid contributing to corruption in countries where they deploy capital.
  • It highlights the risk that corruption within investments may facilitate environmental or social harm, noting the interconnectedness of these risks.
  • It encourages impact investors to adopt a proactive stance in protecting against and mitigating corruption risks. This involves comprehensive due diligence, assessing corruption levels not just in countries where investments are deployed but also in regions and sectors, understanding the investee’s business model, capacity, and willingness to manage integrity risks.

Impact Law Perspectives

Lawyers play a crucial role in achieving positive impact, particularly in improving governance and preventing corruption, fraud, and business integrity issues. Some examples of the spaces where legal processes may interact with, and impact business integrity obligations include:

  • Drafting: Lawyers are involved in drafting the legal provisions in documents that govern business integrity risk, including:
    • Restatements
    • Warranties
    • Undertakings
    • Compliance with laws, including sanctions and corruption laws
  • Due Diligence Process: Lawyers engage in a comprehensive due diligence process, addressing integrity-related issues and contributing to the formulation of action plans and conditions precedent.
  • Business Integrity Action Plans: Lawyers contribute significantly to the development of the business integrity action plan. This may involve:
    • Identifying vulnerabilities through risk assessment.
    • Devising strategies to improve governance and systems.
    • Addressing potential vulnerabilities.
  • Value Addition by Lawyers: Lawyers add value by assisting in the formulation of action plans, ensuring a detailed understanding of identified risks, and providing expertise in enhancing governance and systems to mitigate vulnerabilities.

Operationalising business integrity and implementation in different market contexts

  • InfraCo Africa emphasizes a comprehensive approach tailored to different market contexts. The company ensures that Special Purpose Vehicles (SPVs) it invests in adhere to management policies specifically crafted for each investee country. This involves on-site visits, anti-bribery and corruption training, and mini-audits to verify policy compliance. The goal is to reinforce obligations outlined in legal documents, considering that mere inclusion doesn’t guarantee thorough understanding.
  • External certifications, such as ISO 3001, are actively encouraged, showcasing a commitment to international standards. Localised certifications, such as Blue Company certification in Kenya, have also been used.
  • The focus on avoiding investments in state-owned entities and prioritizing small family-owned businesses is one strategic approach.
  • Encountering resistance to standards exceeding local legal requirements is a common hurdle and striking a balance between international norms and local operations is crucial.
  • The timing of discussions is important, so that dialogues about standards and obligations occur at the project’s outset. Moreover, it is essential to incorporate training as an integral part of the investment process. Investment management is urged to lead these initiatives actively, moving beyond mere checkbox compliance to ensure comprehensive and effective implementation.
  • Investment partners play an important role in harmonizing efforts, aligning strategies, and collectively addressing challenges. A key proposal involves the development of a proper and mandatory AML module, to be undertaken by both investees and sponsors. This proactive measure seeks to embed AML practices systematically within the investment framework.
  • There needs to be a recognition of the dearth of human resources at the investee level. The conventional practice of adding legal or compliance responsibilities on top of existing roles like Chief Operating Officer (COO) or Chief Financial Officer (CFO) doesn’t work. Instead, a dedicated BI and compliance function reporting directly to the board or Executive Committee was suggested.

Role of lawyers in addressing BI literacy gaps

  • The role of impact lawyers in understanding legal documents and their alignment with underlying legislation is important, particularly within the context of different organisational structures and varying levels of capacity. In the case of AgDevCo, where there is no distinct Business Integrity (BI) team, lawyers actively step in to formulate and execute BI action plans.
  • In order to support investees to implement BI programs, AgDevCo is developing training modules with accessible, real-life examples. The emphasis on relatable case studies enhances investee engagement and commitment to the BI process.
  • AgDevCo’s approach involves integrating BI considerations into the broader Environmental, Social, and Governance (ESG) action plan rather than maintaining a separate BI action plan. Due to limited capacity for hands-on portfolio management, the ESG team actively monitors on-the-ground implementation of BI initiatives.
  • Very few SPVs possess a designated compliance role. Instead, functions like legal, finance, or health and safety often incorporate compliance responsibilities. This dynamic necessitates upskilling for individuals in these roles, highlighting an area that requires attention for effective BI implementation.

Legal levers

  • Enforcement in business integrity (BI) poses challenges due to potential market disruptions that may arise from vigorous enforcement actions. Striking a balance between ensuring compliance and avoiding market noise is a delicate task.
  • The use of a put option within a shareholders agreement is considered a “nuclear option” to address severe breaches, including those related to Anti-Money Laundering (AML) clauses. An illustrative example involves a wheat producer facing challenges due to geopolitical events. The invocation of a put option could lead to prolonged and costly procedures. Consideration of broader implications, such as feeding local populations during times of crisis, highlights the complexity of such decisions.
  • An essential aspect of due diligence (DD) involves evaluating whether the lifestyle of the CEO aligns proportionately with the company’s income. This emphasizes the significance of thorough DD in assessing the financial appropriateness of key stakeholders.
  • In the context of loans, specific legal instruments, such as an Event of Default (EoD) or a breach of AML, can serve as leverage. Rather than immediate punitive action, these instruments can be used to initiate conversations about reinforcing policies and identifying gaps. The goal is to collaboratively enhance policies and potentially modify investment terms to facilitate positive changes within the organization.


You can watch a recording of the event below.