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Better investment into infrastructure

Updated: Jan 17, 2023

New model for social investment blog series - part 3 of 3

In my last blog, I outlined an alternative mechanism for infrastructure investment, based not on measuring outputs but rather on monitoring adherence to an operating model (organisation-as-a-platform) that ensures funds are used for social benefit. This allows all parties strip away the clutter (administration that is not only costly and time-consuming but also ineffective) and deliver optimal outputs in Agile fashion.

Here, I'll start to unpack this, by giving a cut-down example. Let's start with the Supercommunities model that an organisation-as-a-platform supports. This model has nine aspects, shown below.

For the purposes of this exercise, we need only look at the first four:

  1. Who are we? The first step is to identify the communities that infrastructure investment is intended to support. Some communities may be geographical - a city, specific neighbourhoods, a region, or other ways of defining areas. Other communities may be cultural or defined by common issues such as disability.

  2. Our challenges. The next step is to define the ways in which new infrastructure should benefit the communities above - for example, by making livelihoods sustainable, food available, or enabling access to services.

  3. Our capital. Community capitals are natural, industrial, and human resources.

    1. Natural capitals could include sources of water such as rivers or rainfall, or plentiful light and heat from the sun.

    2. Industrial capitals could include workforce skills such as local trades or existing infrastructure such as warehouses and factories.

    3. Human capitals could include local organisations such as civic societies or religious institutions that are able to bring people together in a purposeful way.

  4. Our assets. Community assets are means of delivering services that improve the wellness of community members. Such services may belong to the public, private, or third sectors. Assets draw on capitals, and typically also help to sustain them, for example by encouraging and enabling volunteering.

To see how this applies to infrastructure investment, here is an imaginary community:

  1. Who are we? We'll consider inhabitants of a rural area containing a major river, on which farmers depend for fish cultivation and for field irrigation.

  2. Our challenges. The major challenge faced by people in this community is flooding of the river due to climate change. This impacts food availability, both locally and in other regions to which food is sold. It also causes economic hardship, due to loss of output and to repair costs.

  3. Our capitals.

    1. Natural capitals. The community has high temperatures for most of the year. At certain times of year, it has heavy rainfall.

    2. Industrial capitals. Local people are skilled at making and using boats. There are many wharves and boatsheds in towns along the river. Solar-powered drones are often used to monitor and treat farmland.

    3. Human capitals. A long tradition of cooperative farming has led to associations bring established between farmers in different areas along the banks of the river.

  4. Our assets. Local transport services along the river by boat are run on a commercial basis. There are government-funded health clinics in towns - for ease of access, these often operate from disused boatsheds near to wharves. Schools vary greatly in size and resources, so young people often travel long distances for education.

As a way of dealing with flooding, an organisation (we won't worry what type) seeks funding to introduce autonomous solar-powered boats into the river. Several purposes are suggested:

  1. Identify river banks, irrigation channels, and flood defences that need repair

  2. Carry out minor repairs

  3. Monitor fish stocks

  4. Detect theft from fish farms

  5. Track silt levels and other forms of runoff that impact water quality

All of this is highly speculative. The technology will be developed as the work progresses. Flood levels vary dramatically every year. What's more, it is not well understood how the needs and views of people in areas along the river may differ.

A conventional approach to this, whether based on ESG investment, Impact Bonds, or climate accounting would require sophisticated metrics, and these metrics would be based on goals that may turn out to be inappropriate, or appropriate only in some places and not others. A huge amount of the investment funding would go to data gathering and analysis that is likely to be largely futile. This would leave little time to develop the real opportunity - to create a large number of micro-initiatives, driven by local skills, experience, and understanding, that explore new ways to use advanced technology in a wide range of settings and with a wide range of purposes.

To develop the real opportunity, the organisation should seek funding to become an organisation-as-a-platform for this community. The platform in question is autonomous solar-powered boats. The organisation could use their investment funding to offer a range of services to local people for making use of these boats. Funding to local individuals or organisations for specific uses could be via a combination of grant aid for early stage proof-of-concept plus a stakeitback model of community investment to support further development.

The organisation providing this platform may well gather and analyse data on usage, and share the results with its own investors. But this is not how investors judge whether to continue the funding. Rather, they seek evidence that their funding is being used to provide the community in question with a platform for making use of autonomous solar-powered boats, and that the evolution of this platform is genuinely driven by local input into needs and priorities - in other words, evidence that an organisation-as-a-platform operating model has been adopted.

The simplest and lowest cost way for investors to obtain this evidence is to join some of the associated meetings - for example, quarterly steering groups that summarise the progress of more frequent working groups, and that include representatives of local organisations. The overhead of this is so minimal as to be almost non-existent, since it is doing little more than allowing investors to participate in the work itself.

This approach delivers the win-win-win (for governments, investors, and service providers) promised for Impact Bonds. The only people who lose out are the army of bureaucrats who currently soak up a huge proportion of social investment without delivering any real value whatsoever. Perhaps society as a whole could live with that trade-off.

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