ESG, COP 26 and what this means for Law firms

As we look back on 2021, we wanted to take the time to reflect on ESG and COP 26, and what this means for the legal sector as a whole. The most recent ESG market review published in November highlighted the surge in popularity for investment as well as how this became a trend throughout the entirety of 2021.

This was largely due to the shift in focus after the height of the 2020 pandemic forced individuals and businesses to look at how they were operating and where they were investing.

Legal Cheek supports this, highlighting in a recent article that “Environmental, social, and governance (ESG) matters are quickly rising to the top of the agenda for City law firms and clients alike.”. The author, Clare Burgess, Partner at Clifford Chance, broke down that the ESG agenda has grown exponentially in the last decade, but particularly in the last five years.

Within the Legal sector there has been a focus on a number of social issues aside from ESG, with #MeToo and Black Lives Matter being the most prevalent over the past few years. It’s clear that the priorities of law firms are shifting from what we could consider “traditional” and instead making important changes to ensure that they can service their clients in a modern, up to date way.

So, does the legal sector now need to be a force for good?

In October 2021, The Guardian released an article evidencing that multiple law firms were complicit in working with fossil fuel clients in over $1tn worth of legal cases (368 in total). This raised a number of valuable points around the part that law firms play in our growing climate crisis, and how they can become more sustainable whilst still supporting clients on difficult cases. It can often be a predicament as there will always be cases within this realm available, however, putting more onus onto law firms to operate sustainably may be the answer.

The same piece by The Guardian highlighted “Law Students for Climate Accountability is calling on law firms to pledge to stop taking on new fossil fuel industry work, phase out their current work by 2025 and ramp up their work for the renewable energy industry and supporting litigation to tackle the climate crisis.”. Although this is a step in the right direction, the proof will be evident only if firms are held accountable year-on-year.

At the start of November, Cop 26 was hosted and brought solicitors into the limelight, as “Climate change is no longer just a problem for governments to deal with.
What’s being discussed at COP26 will impact all solicitors, not just those that deal with environmental and climate change issues” (LawSociety.org). There will be a stringent management process put in place to keep the legal sector accountable from an ESG perspective, specifically the regulatory landscape.

We are seeing an increase in the demand for ESG focused lawyers. The issue, however, lies in which teams these lawyers may be in. We’ve seen interesting backgrounds such as corporate, tax, environmental and regulatory. Due to the relatively new focus on ESG, it has become apparent that most firms do not have a dedicated team but rather individuals who have a focus on ESG. We, however, foresee that this will change in the coming months, such as Kirkland and Ellis who have launched an ESG & Impact team in London.

Return to work: How has it changed?

With remote working being one of the most significant changes implemented by firms globally due to the Covid-19 pandemic, return to work strategies are a hot topic due to the conflict of opinions from Partner through to Associate levels across the UK and US.

Although most firms globally were forced to adopt a 100% remote working model, it seems that despite impressive productivity levels and performance, this has not been enough to implement permanent flexible working policies, although a minority have. Firms are making more money globally as well as billable hours increasing due to less commuting time eating into individuals’ working days.

From our own experience in the market, it looks as though UK firms are embracing said flexibility with less resistance, whereas the consensus in the US is that the majority would like employees back in the office, although there are still a small portion of firms offering flexibility.

Will there ever be a true work-life balance for junior employees?

An article published by Business Insider highlighted the dangers of a 100% remote model, stating “Junior lawyers at the London office of a major US firm worked more than 14 hours a day on average during lockdown in early 2021” which demonstrates the dangers around extreme flexible working policies that do not allow for employees to find a happy medium in their work life.

Naturally, firms can support junior employees by creating hybrid models as well as educating employees on how to structure their days more effectively. However, even the most robust return to work schemes can be difficult to implement, especially due to the surge in work as the UK and US legal market returns to a “new normal”.

Training and development must also be considered when looking at return to work policies. Firms have to ensure that regardless of what flexible working agreements they have in place, junior employees are receiving adequate training and development to progress their careers.

What is happening in the UK?

Generally, UK firms are approaching remote working with an open mind, and have used Covid-19 as an opportunity to see what ratio of remote and in-office work. A great example published by Legal Cheek is law firm HFW, which revised its salary and bonus structure for employees as well as introducing a new agile working policy. It gives employees up to 40% of their week to work from home, with variations of this being implemented in their other locations.

The model, which was only introduced in the summer of 2021 was devised to ensure that client needs are still prioritised, whilst also taking into account what employees, particularly juniors, are looking for in the workplace.

What is happening in the US?

The US has taken a similar approach to remote working, with a minority asking for everybody in full-time, but a majority are still in a transitionary period. This should not, however, be viewed negatively, particularly as each firm has to find a way of working that doesn’t just serve employees, but also the firm’s goals. However, some US firms are looking at flexible working, a great example being Shearman & Sterling.

Legal Cheek reported that the firm allows for Monday’s and Friday’s to work remotely across the whole group, and instead implementing set days in the office to focus on deep work and also ensure that productivity doesn’t fall by the wayside.

How does this affect Talent Acquisition?

From our experience in the market, candidates are becoming increasingly more interested in what law firms have to offer in terms of their flexible working policies. Due to Covid-19, a lot of junior candidates have suffered from remote working, so although it is now becoming a requirement, there also needs to be reassurance from firms that junior associates will be supported and trained.

There is also a lot more movement within the market as the UK and US market returns to normal. We are working with our clients to provide them with valuable competitor insight so they can attract and retain the best talent in the market, whilst also staying up to date with the latest remote working trends.

Salary changes within law what does this mean?

The search for the brightest thinkers has caused many London firms to reevaluate their salaries for entry-level and mid-level legal talent. This change has seen some US firms offering newly qualified salaries starting at £153,300, with some also including bonuses and better flexibility when working.

This shift has come from influence in the US, who naturally pay Associates higher salaries when they first join a firm. With US firms having roots in the UK, this salary banding exercise has been replicated, which has created even more competition amongst firms in London to attract and retain the best talent.

In an article by Sky News, it was highlighted that there are two main areas for competition, “one if for lawyers in their mid-40s with a couple of decades of experience under their belt. But, the most fiercely-fought competition right now appears to be in newly-qualified lawyers, where, during the last decade, salaries have exploded”.

This sudden demand was partly influenced after multiple hiring freezes during Covid-19; however, many firms now have the budget and the bandwidth to hire entry-level talent as the London market returns to normal.

This was also discussed in an article published in Global Legal Post, stating that “US law firms are waging an associate salary war as they look to match one another in order to attract and retain talent amid surging volumes of work.

Davis Polk & Wardwell set fresh terms for the pay race last Friday, when it upped associate salaries to between $202,500 and $365,000 per year depending on seniority level.

The hike came just a day after Milbank had fired the starting gun by raising first-year associate salaries by $10,000 to $200,000, with its most senior associates receiving $355,000.”

The salary pressures imposed by US-based firms, although positive in many ways for newly qualified lawyers, may also lead junior talent to make decisions purely based on salary, instead of culture, career progression, and other factors that are personal to them. There is a notable generational shift amongst the new wave of legal talent.

Many value the idea of work-life balance, whether this is through flexible working or having the opportunity to socialise more with friends over longer hours in the office. Although some junior candidates are still heavily motivated by the financial gain that many US-based firms can offer, there is a vast majority who would value a lower salary in exchange for a better balance.

This was supported in a piece published by Legal Cheek, which stated that “The reasons given as to why one should not give into such salary temptation and jump ship to a top-tier US law firm are varied and, for many associates, have long held sway.”

However, although there are clear opinions for and against the salary increases, there has been a notable shift in the recruitment of women, supported in an article published by Sky News;

“Another consequence of the war for talent is that, for the first time, women are being elevated to the top tier of what were seen traditionally as clubby, male-dominated environments. For example, Freshfields elected Sydney-born Georgia Dawson to be its senior partner in September last year, the first time a woman had been elected to the role.”

So, what should UK law firms do?

Attracting top talent will always be a priority for firms; however, it can be challenging to strategise the best approach to ensure that the right people are being onboarded. Company culture, mission, and values are equally as important when attracting talent, so although increasing salaries will allow you to attract financially motivated candidates, you must also highlight the other benefits to joining your firm so you attract the right type of individual.

Additionally, Associates wanting a more balanced lifestyle, are less likely to be motivated by purely financial gain. So, in summary, it is completely dependent on the type of firm you run and the type of talent that you want to retain.

Women in Law

The discourse on women in law has continued to evolve over the last few years, and although progress is being made, there are evidently gaps in diversity initiatives across the majority of firms who are looking to attract, retain, and promote women.

In a piece published by Chambers Student in February 2021, 7 years of recruitment data showcased the number of women hired, retained, and promoted in law firms, as well as the current state of the gender pay gap.

 

It’s less about hiring, and more about retaining

Although the figures regarding trainees and associates showed a clear increase in female vs male hiring, the issue lies within retention, rather than attraction and hiring.

There is a clear appetite from women to enter the legal sector, with c.63% of graduates being female. Furthermore, law firms are taking the right steps to ensure that women are being given opportunities to either join their firms or progress within them.

 

Outdated models need to be reviewed

In the same article, Chambers Student highlighted key areas which have contributed to the lack of gender diversity within law firms. The most notable was outdated working practices which aren’t gender inclusive, with role modelling and implicit bias also being highlighted. Some examples include lack of remote working flexibility which would aid women with children, as well as a lack of opportunities designed for women returning to the workforce.

Although role modelling is key for retention, particularly for female associates who aspire to progress to partner level, we believe that outdated working practices are a larger contributing factor to the lack of gender diversity. Women are less likely to receive promotions or get opportunities within a firm whose infrastructure works against women, rather than favouring them.

This was echoed by JD Supra, who highlighted that “female lawyers feel forced to make significant trade-offs between career advancement and their personal lives”. The reason why these trade-offs happen is that firms are being governed in a way that is not conducive to gender equality, instead, it’s the complete opposite.

To achieve true gender diversity and gender inclusion, women in law should never feel as though they have to choose one or the other, being penalised either in their personal life or professional career.

 

How can we incite change?

Whether this is providing additional support for women who wish to have families, or even creating an environment that is welcoming for both men and women, there are key steps that law firms can take to ensure that they are fostering a gender-neutral culture.

It’s important to note that these changes will not be effective overnight, and instead should be part of an ongoing, wider strategy if firms wish to achieve true gender diversity, and retain women who are aspiring to carve out a successful career within law.

At Halkin, Diversity and Inclusion is something we’re vocal about, so helping clients understand how they can develop inclusive working practices is something we do on a day-to-day basis. Some of the things we advise are the following:

Flexible working

There are still a number of firms that haven’t embraced flexible working, when in reality, it’s one of the most critical changes a firm can make to help attract and retain more women.

Whether this is flexible working for current or expecting mothers, or flexible opportunities available for mothers returning to the workforce, creating roles that still allow for professional growth without sacrificing personal duties is integral for retention.

Maternity leave

Although there is statutory and mandatory maternity and paternity leave that has to be offered, that’s often where it ends for a lot of firms. Something that we actively advocate and talk about is how our clients can support women coming back into the workforce, not only from a job security perspective, but also being able to phase back into working without being penalised for the time they inevitably had to take off to have a family.

This can be role modelled through other women at Partner level, but ultimately should be tackled from Associate level and above to instil trust for junior women coming into the firm that they will be supported.

Male advocacy

With the legal profession still being largely dominated by men, we advise clients on the importance of male Partners advocating for gender equality and being open to change. Ultimately, these changes will incite positive change both for men and women.

For example, equal maternity and paternity leave will take the pressure off new mothers, whilst allowing new fathers to spend valuable time bonding with their newborn. If you are a male Partner, the change will only happen once you start advocating for it.

Whether this is educating yourself through attending workshops and events, or simply speaking to women within your firm asking how you can support them, being an ally for gender equality will enable you to attract and retain more women in the long-term.

Female representation in interviews

Having a role model in the interview process, such as a successful female partner, can be a great way to put women at ease in an interview, especially if the firm is male-dominated. If you don’t have females at partner level, you can still include associates or other members of the team, as long as there is some relevance in terms of experience level.

In summary, the journey to achieving gender equality in the legal sector is far from over, however, we are confident that if the right steps are put in place, and partnerships rooted in improving D&I are made, then the needle will start to move, and firms can create a gender-neutral, and equal environment.

Hybrid Working in 2021: What Have We Learned From the Past Year?

Over the past year, we have seen a number of challenges unfold due to lockdown restrictions and an economic slow-down, but we are positive that these hurdles have forced businesses to think critically about the future of work. As a boutique firm, we have focussed not only on ensuring that the quality of our service continues to improve, but also that we are thinking practically about how we approach remote working.

We have had a lot of insightful conversations in recent weeks, and there are two schools of thought within the legal sector. Some believe that the future of work is remote, and that we should embrace the tangible benefits that come with the flexibility of working from home. However, there are many firms and partners who crave the normality that comes from working in an office, particularly in a sector that has always been rooted in face-to-face contact. 

A recent article published in Law.com supported this, stating that some partners are changing their minds on flexible working policies, as some previously “rushed in to” making said decisions. Firms such as Mischcon de Reya have offered unlimited flexibility which naturally, is a benefit for those who need it. However, there have been other firms who have made the executive decision to be completely remote for the foreseeable future, retracting previous flexible working policies they had implemented.

We cannot ignore the benefits of remote working

A silver lining which should be taken from the past year is that there are undoubtedly a plethora of benefits to remote working, regardless of the industry. Increased productivity, better work-life balance and saving money on travel expenses are some of the most common. 

It has also forced a lot of businesses to assess how they operate, and has led to 43 out of 50 of the UK’s biggest employers to embody a hybrid working model. Working remotely even showed us, as business owners, that great work can be achieved without having to come into an office. However, these are all benefits that can often just apply to a small group of individuals.

The line between personal and work has been blurred

One of the key motivators for law firms and their partners choosing hybrid models over 100% remote is due to burnout from lack of work-life boundaries. The inability to decompress over a daily commute, or have a quiet space to focus on work has caused many to be less in favour of remote working, and we understand the conflict that some partners may be faced with as we enter this transitionary period. 

In client facing roles within the legal sector there is nothing more valuable than human contact, and we have experienced this first hand with our clients and talent network. The opportunity to business develop in person is crucial for relationship building, and there are some conversations that simply do not translate well over a Zoom or Teams meeting. 

Particularly for trainees and junior associates, learning through osmosis and being a part of the social aspect of a team is what makes work enjoyable, and if that is lacking, it could inevitably affect retention and employee satisfaction. 

The crux of this conversation is that there cannot be two extremes. Although we are firm believers that being in the office is crucial to growth both from a financial and cultural perspective, there has to be an element of compromise when we have spent the most part of fourteen months in complete isolation. The past year has taught us how there is not a one size fits all approach to remote working and each firm should create a hybrid model that works for them. 

Whether this is allowing flexibility for those who need it occasionally, or adapting to a 50/50 model which works to keep culture and human connection intact, it is crucial to develop a way of working that will serve you well, especially as we are entering a pivotal transition period from June 21st.

What Does Economic Growth Look Like in 2021?

The global economy has inevitably struggled due to the Covid-19 pandemic, however a worldwide vaccine rollout has provided light at the end of the tunnel. It has been incredibly encouraging to see the economy growing after many months of regression across a number of sectors. 

In an article published by the BBC, The Bank of England said that the UK economy is set to grow at the fastest rate in more than 70 years, as additional government funding has helped to flatten the curve and limit job losses. The furlough scheme has been the most notable, which has been extended until September 2021, so businesses have time to recover, whilst still retaining their employees. 

The forecasted economic growth has resulted in employers looking at recruitment drives, particularly in Q3 when we will be entering the final phase of lockdown rules being lifted in the UK.

Although this is positive, many news outlets are reminding us that this should be viewed as a bounce back of the economy, rather than a drastic increase. The same article from the BBC discussed that other elements such as pay rises will take longer to recover and interest rates will plateau instead of improving overnight. The growth we are experiencing is absolutely positive, however should be viewed through a practical lens as the economy is technically still in “recovery mode”. 

From our perspective, we have seen a number of interesting shifts, particularly in partnership promotions, which have increased significantly in comparison to last year. This is naturally a positive outcome for all, and evidences that although we have all struggled through adversity, excellent work is still being done. Promotions signify growth, so learning that this is happening across a number of firms is encouraging.

The recruitment market since the end of 2020 has become candidate-driven, thus shifting the onus on law firms to engage in detailed attraction strategies to ensure they are hiring the best talent in the market. 

This change has given our Talent Network the opportunity to become selective with opportunities, which is a substantial change from last year. However, it is important to note that this shift is perhaps related to a shortage of talent, and an increase in the demand for legal services. Regardless, it is a positive which should be celebrated, especially for those who are just starting their legal careers.

This has been supported by other search firms across multiple sectors, with Financial Management reporting that “overall, over half (56%) of UK employers who participated in the CIPD/Adecco survey indicated they are planning to recruit in the first quarter of 2021, up from 53% in the previous quarter and 49% six months ago. We are confident that these numbers will only continue to grow towards the end of Q3 and the beginning of Q4.

From a client perspective, it has been encouraging to hear that there has been an increased demand for legal services relating to technology, healthcare, and life sciences. 2020 saw these industries working closely together, from frontline workers for the NHS, through to new technology platforms and products to support remote workers. 

This was supported by Deloitte, who highlighted in their “2021 global life sciences outlook” that accelerated digital transformation during the pandemic demonstrated that process changes are required for increased speed to market. This will ultimately affect other industries, such as the legal sector, as streamlining and efficiency will continue to be a priority for all industries moving forwards. 

In conclusion, it is clear that the economy is improving, and although there is still an element of uncertainty of what a “post-pandemic world” will accurately look like, we believe that the influx of promotions within firms and increased desire to hire should be celebrated.

London Partner Hires January – December 2020

2020 was a challenging year for all, and the legal sector was no exception. Although a lot of firms continued to work at a steady, or even accelerated rate, promotions and job changes plateaued. This change was to be expected due to global lockdowns, redundancies, and the introduction of the furlough scheme in the UK. 

Now that we are mid-way through Q2, we wanted to share some insights we gathered from 2020, specifically on London Partner hires. 

In 2020, we identified 275 partner hires by the leading UK Intl/Global, US and UK independent firms; this compares to 361 in 2019, 345 in 2018 and 357 in 2017. The drop in hires represents a 22% decrease compared to the number of hires in 2019 and a 23% decrease to the previous three-year rolling average.

If you would like a copy of the full report please click here.