Community organisations are often excluded from incumbent banking infrastructure. So, how should localities and social organisations manage and fund themselves? How can their sustainable operations be re-modelled and scaled?
These were the questions addressed at Finextra’s Sustainable Finance Live event, in the Art of the Possible Showcase: Re-Engaging the Community Model, Banking the Underbanked, which studied everyday scenarios within community hubs and identified nature-based solutions to their food, high street, and housing experiences.
The panel, moderated by Richard Peers, ResponsibleRisk, was comprised of Tom Chance, Community Land Trust Network; Pooran Desai, OnePlanet; Bumjoo Maclennan, London Doughnut Economy Coalition; Andy Smith, SPORTA; and Debbie Tann, Hampshire & Isle of Wight Wildlife Trust.
Peers kicked off proceedings by outlining the anatomy of the value chain: from the building of a shared community vision, to designing and operational planning, to de-risking and financing the project.
Speaking first was Tann, who began by underlining the importance of solving local sustainability challenges in ways that generate long-term value. “Nature-based solutions are all well and good,” she noted, “but you need to think about all the community benefits.”
Land degradation and food security, for example, are key issues for the UK right now. The long-term solution to this challenge, suggested Tann, is to give “10-20% of productive farmland” back to nature. By removing intensive agriculture from lands that are prone to flooding, high pollution, or low yield, they can be re-purposed for more sustainable use cases.
One site described by Tann has stopped intensively growing cereal grass and using pesticides, and is now supporting a low-intensity grazing business: “11 jobs were created and pollution was reduced,” she said. “This shows why we have to think holistically about all the benefits land can offer.”
Embedded finance concepts have also been shown to deliver positive community outcomes. In a project with the Co-op, Tann described how the Wildlife Trust ensued that from every community purchase of goods – from eggs, to bread, to milk – one penny is put to supporting and managing local nature assets, such as woodlands.
“We measure many of the impacts, so there’s a traceability,” Tann asserted. “We can measure flood risk, how much water is being held, how much wildlife is coming back, as well as the well-being and health-benefits of locals with qualitative surveys.”
Design and operational planning
Speaking to the design leg of the value chain, Desai – with a background in neurology – argued that the “left brain” can be held partly responsible for humans’ inability to see systems as interconnected, and therefore our seeming inability to deliver meaningful change on the ground.
“We are using the wrong part of our brain to solve interconnected problems,” he said. “We need to consider shared outcomes, across sectors, organisations, and even departments within organisations. We are bad at delivering good outcomes because we are all pulling in different directions.”
For instance, the United Nations’ Sustainable Development Goals (SDGs) – which were inspired by Desai’s ten guiding principles for sustainable living – cannot be tackled piecemeal. Firms must develop and understanding of how the impacts of each are interrelated.
“Graph data technology, also used by social media firms, can address this issue,” Desai explained. “Interconnectedness cannot be tackled with conventional data sets. Graph data technology can take any sustainable strategy, break it down into its building blocks and objectives, find shared outcomes, identify synergies, and work out how to fill in the gaps.”
In short, Desai argues, we should be led more by the “right brain”, which is more intelligent, has a higher propensity for systems thinking, and is connected to the realities on the ground. This could entail a cultural re-education.
“We must convert from a consumer to a regenerator species,” Desai concluded. “We have 10 years to do that. I need to rescue people imprisoned in the cells of their excel spreadsheets.” The goal, then, should be to join up our systems, from top to bottom: across local regional and national government policies, budgets, implementation, and the financing of solutions like local resilience bonds.
Implementation and investment in communities
Another cognitive barrier to be overcome, noted Chance, is the low levels of trust that individuals have in the overall planning system and in housing developers. Without propositional power, community members can feel impotent, while the sustainability of projects is imperilled.
Community Land Trusts (CLTs), Chance argued, offer a promising way to address these concerns: “CLTs are companies set up for a place that is owned and controlled by those living and working in that place,” he said. “The purpose is to acquire and steward that land, to the benefit of that community, in perpetuity.”
Already, CLTs form a 300-strong national network, with 37,000 members, 2,196 assets under ownership, and utilising 215,000 voluntary hours between them. They have even resulted in the construction of over 2,000 affordable homes.
“This is still a small fraction of the wider UK system,” Chance acknowledged, “but they are creating market infrastructures. It’s about turning small and underbanked projects into an investable system. Communities need to be brought in to the decision-making process, rather than being marginal agents.”
Smith agreed that financial services and banking can sometimes push communities to aside: “[Financial services] is structural and risk oriented. It doesn’t understand how community projects bring value back to banking. Financial services doesn’t understand sport, for example. It doesn’t build the right products. Sport runs on sponsorship, volunteers, micro-payments...Sports clubs fail to break even 80% of the time.”
But, as Smith put it, sport runs through every town, village and city in the UK, with about 30 million people actively partaking. Sport is therefore a key community asset, helping to “reduce NHS waiting lists, crime rates, and even anti-social behaviour.”
In short, the value of sport is not the clubs themselves or the assets behind them. The real value sits in the community, by drawing it together and improving mental health.
“We must look at a vertical proposition,” Smith argued. “That starts with financial products and services that are fit for purpose. Second, we need to build the right digital tools [and open banking services] to support the clubs and the volunteers that make them work. The community piece is then the foundation.” Once again, the panel returned to the importance of systems thinking.
Scaling a liquidity platform
Peers brought the conversation to a close by making the case for an architecture, or user interface, which – like ChatGPT – can aggregate all the relevant information from various systems for stakeholders.
Then, he argued, “a community member could understand the full picture, from an allotment to a house project. They could understand what liquidity is available on a given day. Who needs a volunteer for 2 hours? Which club needs a coach for a year? And connect the liquidity with service.”
Another community, Peers continued, could pick this model up and customise it to their unique requirements. This “brings scale and therefore institutional capital. This shifts us from silos to systems, or systems of systems.”
When asked whether it believes such a scenario could ever be executed and used, approximately 70% of the Sustainable Finance audience answered yes, but in two to five years; 10% said immediately; and 20% said never.
Finding meaning in the poly-crisis
In a follow-up session unpacking the findings from the Art of the Possible Showcase, Noah Law, MP, St Austell and Newquay, hot-footed from Whitehall to call for more “turn-key solutions” for community-level challenges: “The government needs to sit down and review the suite of solutions that it has. Our first-ever cooperative Prime Minister is now in place. We need a wholesale package, with technical support. CLTs can indeed help projects get off the ground. The goodwill out there is largely untapped.”
By “good growth in every postcode,” Andy Burnham was alluding to the fact that pure GDP increase is not always conducive to sustainability. Through devolution policies, decision-making power can be returned to local communities.
In the same session, Karen Elliott, University of Birmingham, stressed the importance of accessible data for underpinning positive change: “From open banking to open finance, data can cascade through the system, which at the moment is too fragmented. Infrastructures need to come in to connect all the parts. Financial inclusion has always been about getting the underbanked better access to financial services. How do we move that capital down to be invested? Benefits need to stay within the community.”
In her emotive keynote to the Sustainable Finance Live audience Maclennan concluded: “Unless we find meaning in what we choose to do, we will not get out of this poly-crisis.”