Since sustainability challenges are system-wide and tend to result from collective failures of one sort or another, addressing them almost inevitably also needs to be a collective exercise.
Traditionally, legal duties have been approached on an ‘individualistic’ basis but, essentially, the nature of the challenges now faced means that the position here may be more akin to an election – if one person does not participate, it may not make much difference (although it can), but if lots of people take that approach, the system will fall over and everyone will suffer. Business and finance operators may be failing shareholders, beneficiaries and customers if they do not ‘take part’.
Collaboration with others is likely both to reduce the costs and enhance the prospects of achieving a successful sustainability outcome. It may also help to remove ‘first mover’ disadvantages. So, from the perspective of discharging legal duties, these factors may weigh in favour of a decision to act.
Looking at institutional investors specifically, investor cooperation at some level is permitted in all jurisdictions covered by A Legal Framework for Impact and significant collaborative ventures are already underway, such as Climate Action 100+ and the net zero alliances. Those engaging in collective activity need to do so in a way that does not breach competition, insider dealing and market manipulation, and takeover rules and some competition regulators have been flexing their rules and guidance to facilitate it.
Whether or not there is the possibility of formalised collective action, the activities of other investors or third parties (such as NGOs and scientific bodies) which are aligned with a market operator’s goal could also be relevant in deciding whether to act if, for example, they increase the prospect of the goal being achieved.