As we ebb closer to the adoption of an investment policy for our Community Endowment Fund, I have been reflecting with colleagues and partners on the journey we have made these past 18 months, what we have learnt, and what have been the enabling characteristics that made it possible for us to pursue such a radical, impact investing agenda with £1M of public money in 2022.
The participatory nature of the Community Endowment Fund is one of its key characteristics and also one of its most visible. At its core, it is based on the idea that, given the right information and support, people can make great decisions, a topic I have already covered during a previous week. While it is a fairly new idea in the UK impact investment world, which remains highly professionalised, in the US there is a growing recognition that incorporating community voice in impact investing can produce richer, more knowledgeable decisions and safeguard against financial and social impact risks (see for instance http://transformfinance.org/).
Return, but not at any cost
So if participation helps produce better decisions, why are not all impact investors doing it? Well, genuine, transformative participation also means that the return expectations might differ from typical investments, which usually expect a market-rate return. We certainly have seen this with the design of our investment policy, our Community Steering Group wants to see a return, but they do not hold the growth of the fund as a sacred value. What is the point of hoarding money in the face of social and environmental breakdown? Shouldn’t we instead invest it to support solutions that can help people, create jobs and move society towards a more virtuous relationship with our planet? Yet, while most investors and fund managers would agree with this point, the system is unfortunately not (yet) geared to help them move into this space. The pressures around producing high returns can hinder even the best intentioned to move into the participatory impact investing space.
Innovative funding source
This leads me to a second enabling characteristic of the Community Endowment Fund: the provenance of the funds. A large share of our current funding comes from a levy on new developments in the borough, called the Neighbourhood Community Infrastructure Levy (NCIL). Legislation allows NCIL to be spent on infrastructure or ‘anything else that is concerned with addressing the demands that development places on an area’. Between 2018 and 2020, a series of important and innovative decisions by Barking and Dagenham Council have made this money available for participatory impact investment. For the Council, the possibility to stimulate participation and enterprise, while also creating a long-term source of income for the social sector, was seen as a great way to capitalise on a period of infrastructure development. For BD Giving, this has meant that the money did not come with the traditional growth expectations that so many impact investors are faced with, and that we could put the interests of the community first.
Relationship with the Council
This of course, did not happen by chance. And that leads me to the last but not least enabling characteristic: the relationship and trust between BD Giving and Barking and Dagenham Council, which I will cover in a subsequent blog.
As a systems thinker, I’ve long been wary about simple, causal links that provide neat answers and a clean story. However, this shouldn’t discourage us from trying to identify the systemic conditions that have enabled this idea to take off as it might inspire others to try it. Not by following our blueprint, but by thinking creatively with the resources they have in place.
BD Giving Notes is a weekly blog aimed at sharing some CEO Geraud de Ville de Goyet’s thoughts on running a social infrastructure charity. Each post focuses on a couple of things we have learnt or done in the previous week; what’s gone well and what didn’t.