ESG: values, investments and Covid19
The demand for ESG isn’t satiated, powerful investors are calling upon their investment managers to deliver more: more innovation, more impactful products and more measurement.
22 June 2021
B Corp, stands for B Corporation Certification, which is a company which has undergone a rigorous, objective assessment of their impact on their workers, customers, suppliers, community and the environment. There are now more than 3,500 B Corps worldwide, around half of which are based in the US where the certification started. In the UK, there are now over 425 B Corps, an increase of 32 per cent since 2019, which is almost double that of 2018.
While you might be familiar with the phrase in relation to brands such as The Guardian newspaper or fashion brand Patagonia, more recent companies to achieve the certification include venture capital fund MMC Ventures who are working with the Mayor of London on a seed fund for digital companies. Companies signing up to B Corp make a commitment to purpose as well as profit. In a world where some ESG efforts have been accused of greenwashing, it provides third party recognition that a company is taking action to build an inclusive and sustainable economy.
Anthesis' CEO Stuart McLachlan said, “Being a B-Corp provides accountability. For us, it represents the highest bar in terms of performance and authenticity”. Anthesis advises corporates and financial institutions on transaction due diligence, becoming a B-Corp themselves was an important part of their mission. “We believe the only way to make change is for our community to deploy our expertise in a meaningful way, the same way financial institutions look at deploying capital to create the most impact”, said Stuart.
It took Anthesis 12 months to go through the process, which Stuart remarked is fairly typical. “It’s not an easy thing to achieve and most would struggle to score highly across all five areas: governance, workers, customers, community and environment. However, it shines a light on the areas in which your score is low and makes you think about how you might improve”.
One area in which Anthesis scored well was with its ownership structure which is majority employee owned. As for their reaction, “the staff loved it, and it made us feel good about ourselves. Our investors also saw it as a positive and are pleased to have a B-Corp in their portfolio”.
For those operating in the financial services industry, it can be a harder transformation but smaller operations are taking a run at it. MMC Ventures, became a B-Corp in 2020. Victoria Ferguson, partner and general counsel at MMC Ventures, said the decision to become a B-Corp was not one taken lightly. “We thought about whether we wanted to do this. It’s a company commitment that requires stakeholders at all levels of the company to be involved”. She added: “When MMC Ventures was founded 20 years ago, it was because the founders believed that venture capital could be a force for good. That still stands true today, and we felt that B-Corp status echoed our own language and ethos”.
Becoming a B-Corp adds another layer to the ESG movement. Victoria points out that ESG investing is outward looking, focused on the portfolio itself, whereas B-Corp certification is a holistic view of a company, “it adds a different angle”, said Victoria. It’s also a long-term commitment, “there is a requirement to renew every three years and the marking and scoring system alters to reflect a rising standard so there is a challenge of needing to improve year-on-year”. Companies are supported on their journey by joining the Beehive, a community of B-Corps to foster community learning and improvement with events and chatboards. “Becoming a B-Corp is just the start of your journey”, said Victoria.
Since becoming a B-Corp, MMC Ventures has received requests from investors and others in the financial ecosystem who are keen to learn more. “Many are interested in the profit and purpose mantra and looking at how they can live it. It’s exciting to be a leader in the field”, said Victoria.
Another financial services company who has become a B-Corp is WE Family Offices, located in New York and Miami. Managing partners Mel Lagomasino and Michael Zeuner shared their experience. “When we set out to create our firm, we wanted it to be different from the outset. We wanted to create a sustainable business from the perspective of being a fiduciary. A few years into this journey we learnt about B-Corps and how it could validate everything we were doing”, said Mel.
“We realized we were operating as a B-Corp already – thinking like one, behaving like one – it was therefore a natural evolution rather than a strategic decision. It’s not something we felt we needed to overly market to clients, but families we work with are interested in making sure our values align with their values surrounding sustainability and ESG. It’s often viewed as a natural add-on”, said Michael.
As for others following in their footsteps, “I think it’s really hard for financial institutions as they operate in world driven by shareholder demands”, said Michael.
Stuart acknowledges that he doesn’t know “whether in five years’ time, it will hold the same cache,” but says for now “there is a premium attached to it which may develop to put others at a disadvantage if they are not a B-Corp.” However, only time will tell.