For anyone engaged in the financial system or affected by it — which essentially includes all of us — it’s probably no surprise that the system is heavily imbalanced. This imbalance doesn’t just refer to the growing wealth inequality in the United States but also to the power dynamics between those with the knowledge, professional credentials, and financial assets to influence the flow of money and those who seek to benefit from or are in greatest need of these financial flows. Consider some of the critical roles in the impact economy: lawyers, tax professionals, investment advisors, or managers. To enter these professions, one often needs graduate degrees, licenses, and certifications, which require years of study and significant financial resources to attain and maintain. Even just acquiring a basic understanding of these fields sets one apart from those without such knowledge, leading to an inherent imbalance in negotiating power when it comes to allocating capital — even when the ultimate goal of these negotiations is to distribute wealth more equitably.

Thankfully, there are many such practitioners seeking to shift these power dynamics towards a better balance. Over 300 students, lawyers, academics, and other stakeholders from across the globe had the good fortune to learn about and share their contributions in this respect at this year’s Annual Conference on Legal Issues in Social Entrepreneurship and Impact Investing, hosted by the Impact Investing Legal Working Group & the Grunin Center at New York University (the “Grunin Conference”) on June 4th and 5th, 2024.

Since its inception nearly a decade ago, the Grunin Conference has been dedicated to expanding the global community of lawyers working in social entrepreneurship and impact investing. Both the conference and the impact investing field have significantly evolved over this time. This year’s conference featured provocative discussions and introduced innovative tools aimed at shifting power dynamics in the investment space to achieve more equitable, collaborative, and therefore more efficient and shared outcomes for all stakeholders. This includes the individuals, communities, and institutions we aim to positively impact through this work. For the attendees and contributors to the Grunin Conference, it all begins with the lawyers and their primary tool of trade — the documentation.

Participants at the NYU Grunin Center’s 2024 Conference on Legal Issues in Social Entrepreneurship and Impact Investing. Photo credit: ©Myaskovsky: Courtesy of NYU Photo Bureau.

At last year’s conference, Kate Vitasek introduced Vested®, a methodology she developed based on award-winning research conducted by the University of Tennessee College of Business Administration and funded by the U.S. Air Force. Vested® began as a unique approach to procurement contracting, where the documentation shifts from a buyer-seller tug of war — where each party aims to extract as much as possible from the relationship — to fostering “highly collaborative business relationships that enable true win-win outcomes, with both parties equally committed to each other’s success.” The methodology has expanded in scope and impact, encompassing online written and audio/video trainings, several books, and specific engagements and case studies that demonstrate the value retained by each party and the value mutually created—exemplifying the philosophy that 1+1 can be greater than 2.

This year’s Conference highlighted two additional tools for shared-value contracting:

1. The Conscious Contracts® Process is a values-based, relational model of contract formation practiced around the world that advocates for a shift in the relationship between contracting parties from adversarial to partnership, and often a shift in the drafting process from narrative to visual. Discussing this Process at the 2024 Conference was a logical outgrowth of the Vested® conversation at the 2023 Conference. Among other elements, a Conscious Contract is in plain language (not legalese), is clear on expectations, represents an alignment of interests between the parties, and is a living document that can evolve as their relationship evolves. Co-founder Linda Alvarez wrote about the process in Discovering Agreement: Contracts That Turn Conflict Into Creativity; Kim Wright included a section in her book, Lawyers as Changemakers, the Global Integrative Law Movement; and the model itself has been discussed in various business books, including Lead Together: The Bold, Brave, Intentional Path to Scaling Your Business by Brent Lowe, Susan Basterfield, and Travis Marsh.
2. The Equalizing Deal Terms (EDT) Project, launched in March 2024 as an output of a partnership co-led by Sung-Hyui Park of Bates Wells (a UK impact law firm) and Rana Zincir Celal of the Equality Impact Investing Project, with ongoing guidance from a group of key actors in the UK social investment community. The EDT Project set out to raise awareness about and address the (sometimes inadvertent) power imbalances between impact investors and investees during investment and legal processes. Rather than creating terms or guiderails whole cloth, the partnership researched, compiled, and ultimately synthesized into five Core Principles the practical solutions and practices already being implemented within the impact investor community. The Project’s resulting recommendations seek to shape investment deal terms, legal processes, and documents that are clear, balanced, and reflect an equitable sharing of risk and more equitable relationships between investors, investees, and their advisers.

How can we encourage more investors, investees, and their advisors — especially lawyers and investment advisors — to adopt practices that promote greater equity in risk-sharing, terms-setting, and desired outcomes? We need to rethink how we educate. In this context, the Grunin Conference showcased Ashoka’s Changemaking for Lawyers Syllabus Project, which is creating coursework for “Changemaker Campus” law schools that delve much deeper into social enterprise than traditional curricula. The project is led by a working group headed by Annette McGee Johnson, Legal Counsel for Strategic & External Engagement at Ashoka, and Susan R. Jones, Professor of Clinical Law at George Washington University School of Law.

How can we encourage more investors, investees, and their advisors — especially lawyers and investment advisors — to adopt practices that promote greater equity in risk-sharing, terms-setting, and desired outcomes?

I would take this effort even further. In my opinion, we need more interdisciplinary education and practice focused on social impact. Our higher education, and even high school, curricula should integrate all relevant expertise and perspectives, encouraging collaboration across disciplines to develop creative approaches to our most complex challenges. Imagine the capstone projects that could emerge from a course or degree program where students and faculty from business, law, engineering, and healthcare work together to learn and innovate. When we co-create solutions in partnership, we build greater trust, stronger relationships, and the right incentives to share power, both at the drafting table and in the outcomes we achieve.