Market governance mechanisms can be organised into the following groups:
- Economic: using price incentives to change behaviour
- Regulatory: using legal requirements to enforce or ban certain behaviours
- Cooperative: using agreements to encourage partners (other organisations, governments or individuals) to voluntarily change their behaviour
- Informational: raising awareness of sustainable development (including poverty or environmental issues, for example) to change consumers’ and investors’ behaviour
Read more about the different types of market governance mechanisms in our research prospectus.
Research highlights
We are looking at individual mechanisms, such as Fairtrade, as well as groups of mechanisms, such as certification or ‘informational’ mechanisms. Over time, we aim to also take a broader view across groups of mechanisms to understand their combined impact. Read more about individual market governance mechanisms — what they are, how and where they work, and what research has been done on them — in our database of market governance mechanisms.
Examples of our research include:
Mechanisms for community engagement
We are developing a body of work on mechanisms for community engagement, including Free Prior and Informed Consent (FPIC), grievance mechanisms and the Extractive Industries Transparency Initiative.
For example, we are analysing the use, impact and effectiveness of grievance mechanisms as a tool to engage with local communities in natural resource investment (oil and gas, mining and forestry), reducing potential conflicts and social tension by addressing local concerns. Our research highlights the importance of a transparent, coherent and responsive overall approach to stakeholder engagement, of which a grievance mechanism is an integral part. Our work demonstrates that grievance mechanisms need to be culturally appropriate, that communities have to be appropriately informed about the mechanism’s existence and how to use it, and that information on the use of the mechanism and the number and nature of grievances needs to be meaningfully fed into the company’s overall strategy. Grievance mechanisms are frequently required by project finance investors and lenders, but monitoring them often becomes a tick-box exercise – it is important to develop indicators of success that truly reflect the social impact of the mechanism.
Watch this space!
Investment principles
Investment ‘principles’ are one set of tools used to encourage investors to consider more than purely commercial and short-term gains. SSM’s research reviews the content, take-up, implementation and impact of investment principles, with a focus on: The UN Principles for Responsible Investment; The Equator Principles; The European Investment Bank’s Environmental and Social Principles and The OECD Declaration on International Investment and Multinational Enterprises.
Our research finds that investment principles – in their current state – have a limited impact on sustainable development. Reasons for this include: the vague language used by the principles which allows for considerable and often lax interpretation of the principles by investors; a lack of guidance on implementation on the principles; and the difficulty in applying principles to particular asset classes. In some cases fiduciary responsibility prevents many investing institutions from compromising financial returns for non-commercial considerations.
See SSM’s latest publications for more information.
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 20110520 Research prospectus.pdf | 420.16 KB |