YSI Finance and Social Justice Workshop University of Glasgow 21-22 March 2019

Finance and Social Justice Workshop

 

Young Scholars Initiative

Finance, Law and Economics Working Group

 

University of Glasgow

21st – 22nd March 2019

DEADLINE: 18 Febuary 2019 

 

The “Finance and Social Justice” workshop brings together NGOs, early career academics, and PhD and Masters students in Finance, Law, Economics, and any related discipline, to critically evaluate the inter-relationships between global finance and aspects of social justice, and, at the same time, to explore new formats for conferences and presentations. Often, when academics present work at conferences and seminars, a selection of related papers is made and each individual presenter gives an overview of their work, subsequently receiving questions and feedback. While the papers may address a particular theme, little attempt is made in these forums to consider how each individual’s methodological and disciplinary approach can contribute to the understanding of a particular problem, never mind to consider its solution.

 

The Finance and Social Justice Workshop will invert traditional conference and seminar formats by inviting teams of NGOs, academics, and students to contribute research, critiques, and new ideas from their own disciplinary perspectives to address the same social problem. In this innovative format, an NGO practitioner will first outline the particular challenge that their organisation seeks to address; then students will present analyses of (and possible solutions to) the problem from their diverse methodological and disciplinary approaches.

 

Invited participants will be provided with one night of accommodation in Glasgow and will receive partial reimbursement of travel expenses. Catering and a workshop dinner will be provided. 

 

Below, you will find the following case studies provided by two NGOs:

 

  • Sustainable Finance: Room for Social and Human Rights?
  • Finance and Inequality: Reshaping the Market for Corporate Control

 

Choose one and consider the corresponding question(s) as explained below.

Panel 1 – Case study 1

 

Sustainable Finance: Room for Social and Human Rights?

 

ShareAction - Background

 

ShareAction is a charity that has spent the past 12 years working to make investment a force for good. The vision is of an investment system that truly serves savers and communities, and protects the environment for the long term. The ShareAction movement demands reform in the ways large investors make decisions and account for them and seeks to develop a legal framework that gives citizens’ rights to information about where and how their assets are invested. The ambition is to ensure that people can see what happens to their money and become more engaged with the workings of the investment system. By improving corporate behaviour, ShareAction’s campaigns aim to make people’s lives better and to protect the environment.[1] A current priority for ShareAction is to engage with the European Commission’s Action Plan to Financing Sustainable Growth, which forms the basis of this case study.

 

Case Study: Sustainable Finance: Room for Social and Human Rights?

 

Sustainable finance is the provision of finance to investments taking into account environmental, social, and governance considerations. Sustainable finance includes a strong green finance component that aims to support economic growth while reducing pressures on the environment; addressing green-house gas emissions and tackling pollution; and minimising waste and improving efficiency in the use of natural resources.

 

The European Union is strongly supporting the transition to a low-carbon, more resource-efficient and sustainable economy. In March 2018, the European Commission presented some of its regulatory initiatives to promote sustainable finance in the EU in its Action Plan to Financing Sustainable Growth. This important initiative aims to establish a framework to facilitate sustainable investment. A central element of that framework is the development of a unified classification system ('taxonomy') on what can be considered an environmentally sustainable economic activity. The idea behind the taxonomy is to create a list of activities and industries that are officially recognised as sustainable, or more precisely, environmentally friendly, climate-friendly, and socially responsible. It is believed that in the long term this can assist the financial industry in identifying green or sustainable activities (companies, projects etc) to be financed.

 

The EU’s work on developing an environmental taxonomy has attracted criticism for its explicitly ‘climate-first’ approach. In the drive to promote climate-friendly financial investment and to define what is ‘green’, the taxonomy misses the wider social aspect of sustainability. It underweights how human beings and their livelihoods might be affected by new ‘green’ investment strategies. Critics are concerned that the European Commission’s approach is in tension with other commitments incumbent on the EU to respect, protect, and fulfil human rights. This could incentivize the development of a new market in green financial products that have a negative impact on the enjoyment of human rights. For example, so-called ‘green grabbing’ in Africa, Amazonia and beyond has seen businesses like Carbonscape planning to dedicate 930 million hectares for the cultivation of biochar (a soil enriched with carbon) on so-called "under-used, marginal" lands in Africa, where farmers and pastoralists make their livelihoods.[2]

 

Within the last couple of years, ShareAction and other NGOs have been working to bring human rights into the sustainable finance debate and, in particular, in relation to the design of a sustainable finance taxonomy.[3] Nevertheless, they are struggling to get their message across. These difficulties stand, to a large extent, on a miscommunication problem. Apparently inspired by the relative success of environmentally-conscious groups to convince the financial services industry that environmental protection and, in particular, climate breakdown, can have a material impact on the financial return of their investments, the European Commission has emphasized the need to collect better data before a classification system for ‘socially impactful’ economic activities can be developed with any granularity.[4] ShareAction and other NGOs, on the other hand, insist that the European Commission’s understanding of social impact and human rights is very narrow and very data-driven.

 

Application

 

We invite applications from students and young scholars from any discipline to participate in a panel that will explore the issues surrounding attempts to encourage sustainable and rights-respecting finance. Drawing on your own disciplinary and methodological perspectives, consider one or more of the following set of problem questions and submit a response (up to 400 words) through this website. Try to be innovative and to think of creative ways to tackle the challenges specified.

 

  • Following the European Commission’s data-driven approach, one way of solving this miscommunication problem is to measure the impact that social and human rights issues can have on financial returns, financial stability and similar considerations. How might we do that?

 

  • What challenges (methodological or otherwise) might this data-driven approach encounter? Might this data-driven approach fail to cover important aspects of social and human rights issues? For example, are all risks associated with social and human rights issues financial in nature? Can a data-driven approach capture the full impact that finance can have on social and human rights issues?

 

  • Can you think of any alternative solutions to the challenge of making finance more rights-respecting?

 

  • Attempts to make economic regulation ‘human rights respecting’ have a long history – notably in the case of the international trade regime – but little concrete progress has been made in turning rhetoric into reality. What do you think are the challenges of making financial investment human rights respecting/realizing?

 

[1] For more information see https://shareaction.org/what-we-do/#Campaigns.

[2] See M. Leach, “Green grabbing”, Green Economy Coalition (31 July 2012), available at: https://www.greeneconomycoalition.org/news-analysis/green-grabbing-dark-side-green-economy.

[3] See ShareAction, “Human rights and Finance: What Next for EU Policy?” (March 2018), available at: https://shareaction.org/wp-content/uploads/2018/03/EUPolicy-HumanRightsFinance.pdf.

[4] See e.g. European Commission, Impact assessment accompanying taxonomy proposal (24 May 2018) SWD(2018) 264 final, pp. 62, 111. Full text available at: https://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-5524115_en#pe-2018-3333.

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Panel 2 – Case study 2

 

 

Finance and Inequality: Reshaping the Market for Corporate Control

 

Oxfam - Background

 

Oxfam is a global movement of millions of people who share the belief that, in a world rich in resources, poverty isn't inevitable. In just 15 years, extreme poverty has been halved. 15 more years and it could be ended for good. However, inequality is a major obstacle to eradicating poverty. With current levels of inequality, it would take 200 years and a global economy 175 times larger to get everyone above $5 a day. We can’t end poverty without drastically reducing inequality.

 

An important dimension of Oxfam’s current work concerns the role of private businesses and corporations in contributing to economic inequality. Research conducted by Oxfam underlines that inequality, in-work poverty, and environmental destruction are being driven by a model of business and finance that puts a disproportionate emphasis on maximising shareholder value. Looking at sources of household income we find that the majority comes from wages and dividends. Companies are disproportionately owned by the wealthiest, so the more cash to shareholders = more (income) inequality. A fixation on shareholders diverts investment away from the things can could reduce inequality and promote sustainable development, such as investing in a living wages. However, improving the social or environmental effects of an investment can raise costs, which can mean a lower return on investment (ROI).

 

Oxfam’s Future of Business Initiative works across numerous different campaigns and programmes to challenge the current shareholder primacy model of corporate governance and to make alternatives mainstream. Oxfam is promoting legislation that levels the playing field between shareholder-first and alternative businesses in order to give a voice to other constituencies that internalise the costs of socially-damaging externalities. For more information, see: https://views-voices.oxfam.org.uk/2017/09/missing-piece-puzzle-fourth-sector/ 

 

Case Study: Reshaping the Market for Corporate Control

 

A major dynamic exacerbating economic inequality in the current climate is the fixation on shareholder value. The current business model is based on overcoming the ‘agency problem’ i.e. ensuring managers act in the interest of shareholders. The ‘market for corporate control’ is the strongest power shareholders have - if a company is performing below its perceived value then an investor can buy a controlling stake in the business and replace the management. Investors take a very short term view (bird in the hand is worth two in the bush), meaning that capital markets are characterised by a fixation on short-term profit.

 

The case of Unilever illustrates some of the challenges of moving towards alternative models of corporate governance. Unilever has taken some industry-leading steps on climate change, human rights and smallholder agriculture. Over time, their long-term vision created tensions with commercial performance leaving them vulnerable to takeover by short-term investors. Last year Kraft Heinz mounted a £115bn hostile takeover bid to gain control of Unilever. Chief Executive Paul Polman fought them off and, in order to make the company less attractive to hostile investors, Unilever cut costs and loaded up on debt, which they used to pay off shareholders. When Unilever tried to move the corporate base to the Netherlands to resist future hostile investors, they were shot down by shareholders.

 

Oxfam argues that ending poverty requires business models that aren’t trapped in this model of capitalism. We want to promote businesses that share power and profit among stakeholders and pursue a social mission (e.g. social enterprises and co-operatives). Such companies are motivated for a social purpose, meaning that they put their profits towards that social mission and pay workers fairly, rather than lining shareholders’ pockets.

 

Application

 

We invite applications from students and young scholars from any discipline to participate in a panel that will explore the issues surrounding attempts to reshape the market for corporate control. Drawing on your own disciplinary and methodological perspectives, consider one or more of the following set of problem questions and submit a response (up to 400 words) through this website. Try to be innovative and to think of creative ways to tackle the challenges specified.

 

  • A major challenge for alternative, stakeholder inclusive companies is getting access to finance on a level playing field with shareholder-focused companies. What kind of changes in financial regulation, the broader legal system, or economic and financial theory could help to discourage shareholder primacy and encourage investment in companies with alternative governance models?

 

  • What are the obstacles to trying to promote domestic industries with an employee / stakeholder focus or alternative model? Is this possible within the current framework of international governance? Think of examples from world trade law or international investment law, for example.

 

  • One way of promoting investment in sustainable stakeholder focused companies is to put a tax on the consumption of their products, but this often impacts on the poorest in society, is there a way to avoid this?

 

  • Can you think of alternative proposals to get capital markets to work for companies who put purpose before profit? One example is https://ethex.org.uk - an ethical stock exchange. But how do we make this mainstream? Could other financial innovations / financial products be used to promote these goals?
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Should you have any questions, do not hesitate to contact us:

Anna Chadwick: Anna.Chadwick@glasgow.ac.uk

Javier Solana: Javier.Solana@glasgow.ac.uk

Cecilia del Barrio: Cecilia.delbarrio@unitn.it