Legal profession takes up social responsibility

Firms are building the legal structures to support new models of enterprise

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As the lines continue to blur between financial and social impact, North American law firms are recognising they can play a vital role in building the legal infrastructure underpinning what many refer to as the “impact economy”.

For firms, this means they can make a difference not only to individual lives but also to the broader economy.

Law firms are pursuing some of these activities through projects and initiatives in which they work with schools, charities and other organisations. Others are using pro bono activities to engage more deeply, often in initiatives that use market mechanisms to tackle social problems.

Of course, while supporting the impact economy is a focus for some firms, social justice remains a strong motivator for lawyers. For example, Reed Smith has worked in Haiti on helping victims of the 2010 earthquake gain asylum on humanitarian grounds in the US.

For Skadden, Arps, Slate, Meagher & Flom, the approach has been to come up with what it calls a “fund within a fund” – an additional $10,000 grant to any graduate from the Skadden Fellowship programme. Founded in 1988 by the Skadden Foundation, the scheme supports recent law school graduates and judicial clerks in pursuing public interest projects.

The Flom Incubator Grants – named after the late Joseph Flom, the Skadden partner who co-founded the fellowship scheme – support either innovative projects or ones that increase the impact former fellows are making.

One recipient, Amy Laura Cahn, a lawyer at the Public Interest Law Center of Philadelphia, has used the grant to expand her work in the city to increase access to vacant land to people who want to create community gardens.

Ms Cahn advises clients on how to obtain a property’s title and campaigns for legal changes that would make land transfer fairer and less complex.

The grants can also be used as seed money when former fellows want to take on something more ambitious. “They have been successful in gaining additional funding because they have the grant from us first,” explains Lauren Aguiar, litigation partner at Skadden and chair of the foundation.

Also focused on increasing access to legal services, Fenwick & West has partnered with DLA Piper to run clinics in public libraries for low-income communities in California. The clinics use Cisco’s WebEx conferencing technology to give disadvantaged groups virtual access to pro bono legal advice.

However, an increasingly important way for the legal sector to engage with society is by using its knowledge of corporate law to help develop business models aimed at creating social as well as financial impact.

For example, Womble Carlyle has created a multidisciplinary impact economy practice. The team – led by Pam Rothenberg, a managing partner – helps social entrepreneurs gain access to capital and develop sustainable business models that will advance their missions.

Some law firms are assisting the creation of financial mechanisms that help social investments succeed. For example, Dechert has structured an investment loan that allows cacao farmers in Belize to stabilise their business before beginning to repay the loan. The model means that debt repayments are tied to the receipt of revenue, rather than to a fixed repayment schedule.

Ropes & Gray, in its largest pro bono commitment yet, has helped structure an initiative designed to reduce reoffending through training and counselling for men on probation or leaving the juvenile justice system.

The Massachusetts Juvenile Justice Pay for Success Initiative is a transaction also known as a social impact bond. In such deals, investors receive a return once social interventions have achieved their goals and generated savings – which in this case would be generated through lower incarceration rates and increased job and skills training.

Winthrop Minot, a partner at Ropes & Gray, points out that the impact of this work can go beyond Massachusetts. “We knew that when the next pay-for-success transactions were picked up, our papers would be used as a starting point,” he says. “So we wanted to get as much right as we could the first time around.”

In a pro bono engagement that has lasted for many years and involved many lawyers, including senior partners, Linklaters has worked with B Lab, a New York-based non-profit organisation, on developing legal frameworks that help business play a role in achieving positive social change and solving environmental problems.

“This is a direct application of their skills to something pretty innovative, which is evolving corporate law,” says Andrew Kassoy, co-founder of B Lab. “These are people who want to see the law evolve and understand the parameters for doing that.”

The work has included the creation of a new type of corporate entity: the “benefit corporation”. Registered benefit corporations can give the pursuit of social and environmental impact the same attention as profit.

As B Lab has started exploring how the law might be applied in other countries, Linklaters has been able to help through its overseas network. “The thing that’s been most valuable to us has been the reach they have in other markets,” says Mr Kassoy.

The advent of new legal structures such as benefit corporation legislation and financial transactions such as pay-for-success deals broadens the range of pro bono work available to corporate lawyers.

“For corporate lawyers, it’s hard to find good pro bono projects,” says Mr Minot. “You think of pro bono as standing up and defending someone in court.”

This is changing, as momentum grows behind the idea that business can be used as a tool to solve social and environmental problems.

And there appears to be a hunger among lawyers to participate, as Mr Minot found when soliciting help from colleagues to work on the pay-for-success initiative.

“Whenever I contacted someone if I needed help in a particular area, no one said no,” he says.

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