Place-Based Impact Investment at The Good Economy: Future Directions of Travel
In May 2022, The Good Economy began testing the practical applicability of its conceptual model of Place-Based Impact Investment (PBII). We set up four demonstration ‘PBII Labs’ located in Dunoon, Argyll and Bute (adventure tourism regeneration), Manchester (social housing reprovisioning), Bath (affordable housing) and South Essex (net zero housing). This initial R&D programme ends in March 2023 with final workshops for local stakeholders, investors and experts and strategic assessment reports on the proposed investment projects.
Parallel to this, TGE will be launching a new “PBII Strategy Consulting” service in the New Year. This has been triggered by burgeoning interest in PBII from local authorities, institutional investors and banks and a range of other economic development stakeholders (including master planners, engineering consultancies and developers). To create a dynamic and cohesive ecosystem out of this market and policy interest, we are designing a new 3E PBII Goal Framework that can be used to map players, places and projects by the three great, long-term societal challenges, namely:
- E for Ecological Sustainability, The Net Zero Transition: governance and political support; just transition to climate neutrality, lifestyle changes, enabling technologies, net zero transition finance
- E for the Essentials of Everyday Living, Resilient and Excellent Foundational Economy: housing, town centres, education, health and care, utilities and food supply
- E for Economic Dynamism, ‘Long-Wave’ Innovative Growth Sectors (entrepreneurship and skills pathways): holistic health care and biotechnology, green technologies, nano technology, AI and the Internet of Things, space and materials technology
The 3E Goal Framework offers a societal level perspective on PBII – akin to the Sustainable Development Goals – and from TGE’s experience, it resonates closely with the strategic objectives of local stakeholders and impact-seeking investors. This Framework is intended to complement the now familiar 6-Pillar Conceptual Model of PBII shown below, imbuing it with a stronger purpose and sense of direction and hence a powerful social rationale for scaling up and mainstreaming PBII. In combination, the Framework and the Conceptual Model can provide investors, local stakeholders and other sectors with a ‘road map’ for designing and aligning strategies based on the core PBII principle of shared social value creation.
Insights from the PBII Labs show that getting PBII to work on the ground is a complex challenge. There are financial and non-financial, tangible and intangible barriers to PBII as social innovation. Between ‘the idea and reality’, to quote TS Eliot ‘falls the shadow’. There is much to be done in creating successful local PBII partnerships between local authorities and their partners (e.g. NHS and Universities/Colleges) and impact-oriented investors and other players. With public and private bureaucracies on both sides, and in today’s climate of austerity and heightened economic uncertainty, how do we get ‘the elephants to dance’.
We need ‘walled gardens’ to build mutual respect and understanding to realise the potential of PBII. That is our rationale for starting with the PBII Labs. TGE itself has unique experience of working on both sides of the net – investors and banks and local authorities and partnerships. It is absolutely essential to prepare the ground for constructive discussion, fully and diligently and openly. The Labs are ‘bridging social capital’ for developing social networks, norms of reciprocity, mutual assistance, and trustworthiness with people who differ from us. The worlds of The City of London’s financial sector and Britain’s local government town halls are miles apart – PBII is about bringing them closer together by connecting capital to communities.
PBII should be a win-win game for investors and local stakeholders through the joint discovery of the commercial and institutional pathways needed to make projects attractive and doable. That is why our new PBII Strategic Consulting service will offer a project-level shaping-strategic assessment module based on learnings from the initial PBII Lab programme. If this works well for all sides, TGE will recommend creating a PBII Impact Framework for the project based on the 3E Goals Framework, and the drafting of a strategic business case and a robust stakeholder action plan. The latter is essential for minimising transaction costs (de-cluttering) and de-risking projects – thereby, making projects and places more attractive investment opportunities. As such, mobilising bridging social capital and finance capital are what makes PBII a driver of innovation and change.
Positively, TGE’s asset manager clients are increasingly expressing interest in PBII as a new dimension for their investments in housing, town centre regeneration, local energy infrastructure and retrofit, farms and sustainable food production, and SME finance. This ‘all around the 3E clock’ interest originates with investors as well as local authorities and master planning/engineering consultancies. TGE’s new PBII Consulting service will draw on recognised experts in these various sectors, including people with expertise in project funding and management.
To conclude, The Good Economy’s ambition is to build a high trust, high dynamism, wide inclusion ecosystem that will scale up PBII and make financial capital a force for good. We have already started work on building this PBII ecosystem. The stakes are high, but so is the prize: a fairer and more sustainable future for everyone, everywhere. These are TGE’s future directions of travel – come join us in this exciting and worthwhile endeavour.
If you want to get involved, get in touch with Mark Hepworth, The Good Economy’s Director, Research and Policy, via firstname.lastname@example.org.