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The innovative activists of finance and law, and how they’re making a splash

By Fergus Pitt

 

In the universe of sustainable finance, we’re getting used to growth. More investors are demanding ESG screens, more are looking for impact, and more are flexing their custodial rights.

 

We’re also getting used to evolution and innovation. So it shouldn’t be a surprise that the sustainable funds management and responsible investment advisory businesses are seeing different impact models emerge: In particular, a fast-growing cohort of innovative companies and organisations who are having remarkable environmental and social impact. They are still working within the financial system, still using sophisticated financial and legal techniques, and still aiming to increase fairness and sustainability, but they appear to have picked up the tools of finance from a very different direction, and have very different operating models.

 

Collectively, they are changing the investment industry in two important ways.

 

These innovative organisations are an additional lever of change available to committed sustainable and socially-responsible investors. They are a force for accountability, both for the assets and companies that attract investment, and for investment managers themselves.

 

These organisations below exemplify this movement.

 

Working primarily with finance levers:

– Australasian Centre for Corporate Responsibility (ACCR) – Shareholder activists for climate and society

– Market Forces – Finance and environmental research & campaigning

– Tobacco Free Portfolios – Pioneering divestment campaigner, focussed on tobacco

 

Working with business, economics & political levers:

– Beyond Zero Emissions – Combined think tank and action tank supporting a transition to net zero

 

Working primarily with legal levers:

– Environmental Defenders Office (EDO) – Public interest lawyers who have worked in climate and financial risk cases

– Environmental Justice Australia (EJA) – An integrated legal and campaigning centre

– Equity Generation Lawyers – For-profit law firm that has run effective and high-profile climate law cases

– The Grata Fund – For-purpose litigation funding and campaigning

 

Working across finance, legal and political systems:

– The Sunrise Project – Strategic grant makers and organisers for climate justice

 

Some of these organisations are very new, like Grata and Equity Generation Lawyers, and some, like ACCR, EDO and EJA have transformed themselves in recent years. As a group, however, they appear to be experiencing some common trends.

 

Resources

Budgets and teams within these organisations are growing fast. In many cases their revenue is doubling at least, according to their most recently filed statements and my interviews with their executives. A typical annual budget for this group was $2m-$5m last year. To put this in context, these operating budgets are much smaller than Australia’s biggest not-for-profits, like Beyond Blue ($78.8m) or Fred Hollows Foundation ($96m). Though even at last year’s relatively modest size they’re having impressive results. One financial adviser I spoke to said ‘bang for buck’, these are good organisations to support, and most of their executives say their next set of financial statements will show big revenue increases.

 

That growth reflects two things: firstly, more and more people are convinced of the urgency of climate action and social inclusion, and make donations accordingly. Secondly, these organisations have good stories to tell, both in terms of their impact, and in terms of the innovation, creativity and intelligence of their work. That’s appealing to people who have been successful in life, and are therefore in a position to provide financial support.

 

Public profile

Mainstream and influential media are paying attention to their work. They often feature in the pages of the Australian Financial Review, New York Times and the Financial Times, not to mention the Fairfax/Nine dailies. Although media attention itself doesn’t protect the environment or make a society more inclusive, it is a channel to influence decision makers, build awareness from potential donors, and positive sentiment from talented people who might volunteer or join their staff.

 

Impact

Dollar for dollar, this group of organisations has an exceptionally strong impact record. Each of them can point to specific wins, but here’s a sample:
– Market Forces’ campaigns that coincided with climate investment policy changes at banks, insurance companies and superannuation funds, including HSBC, the ‘big-four’ banks and HESTA.

– Beyond Zero’s contribution to large-scale ‘just transition’ plans and action in the Hunter Valley and Northern Territory.

– Grata helping to establish a right of habitable housing for 65,000 people in the Northern Territory, leading to compensation and dwelling repairs in the Santa Teresa community near Alice Springs, and a new legal playbook for all 67 remote communities.

– The McVeigh vs Rest case run by Equity Generation Lawyers, which appears to have changed the climate investment policy of Rest, and garnered the attention of trustees in other super funds.

 

 

The takeaway and a prediction  

This generation of innovative organisations has emerged as a potent force in the finance system and no understanding of the sustainable finance movement is complete without understanding this cohort. They take both direct action and also aim to drive systemic change. They’re characterised by innovation, activism, and the sophisticated use of financial and legal tools.

 

But, as the wider culture has accepted the need for social and environmental sustainability, climate and social laggards have generally abandoned their arguments against those ideas. Instead, the laggard companies are devoting huge budgets to spin, delay, obfuscation and legal protection, rather than addressing the underlying transition risks in their business.

 

That kind of greenwashing has already been a major focus for some of these activist organisations, and their leaders say that their anti-greenwashing activism will only increase. Taken alongside ASIC’s statement that they’ll take regulatory action against spurious net zero claims, this movement may prompt company directors to treat greenwashing itself as a serious business risk.

 

Fergus Pitt is a strategic communications and advocacy consultant specialising in sustainable finance. He has worked for Impact Investment Group, The Australia Institute, Columbia University’s Tow Center for Digital Journalism, and the Australian Broadcasting Corporation. This article is based on his recent landscape review; ‘The Innovative Activists of Finance and Law’, available upon request.