Mark Hepworth is a multidisciplinary economist and entrepreneur whose international career spans academia, public policy and business consultancy. He leads The Good Economy's research and policy work on inclusive and sustainable development.
Today’s geopolitical upheavals – a cost of living crisis and war on our doorstep in Europe - mean that the UK is faced by a prolonged period of heightened economic and political uncertainty.
Even before the latest developments, communities and businesses across the country were painfully adjusting to life after Brexit and life with Covid. Meanwhile, the challenges of inequality and climate change are growing more daunting by the day. The future is hard to predict, and planning is hard to do with real confidence – whether in sitting rooms or boardrooms.
Our response to these challenges should be to come together around a common cause, starting in our own ‘backyard’ – that is, the UK’s domestic economy, with its building blocks of home markets and industrial clusters and urban and regional systems. Our national assets need a great overhaul and a new appreciation of their economic and social value. As one nation, we have to build a future-proof Good Domestic Economy (GDE).
In this context, here is what I think ‘Good’ means for the private, public and social sectors and a new social contract:
- Setting transparent, binding ecological limits for all economic activities (production, distribution and consumption).
- Investing in the ‘foundational economy’ - health, housing, education, food and clean energy - as a cornerstone of shared prosperity and community wealth building.
- Making the measurable achievement of a more socially efficient allocation of capital the high level goal of SDG-aligned investments, with all social and environmental externalities priced in (including, for example: poverty, air pollution and mental health).
- Ramping up investment in real economy sectors/‘alternative’ asset classes to ‘re-seed’ the economy, with the converging Health, Digital and Climate Change sectors recognised as the 6th Kondratieff Wave carriers of long-term innovation and entrepreneurship.
- Decentralising Britain’s economic system through effective devolution (follow the OECD’s evidence-based advice here) and creating a level playing field in public procurement markets.
- Nurturing a wide variety of talent and skills in every classroom, workplace and home, and make Good Jobs for All an umbrella goal of the Levelling Up strategy (doing this will go a long way to ridding the country of the scourge of Dickensian child poverty).
In talking about GDE, I have added ‘Domestic’ to our company name ‘The Good Economy’. This phrasing helps articulate what we are trying to achieve in our collaborative work on Place-Based Impact Investing (PBII), which kicked off with our white paper ‘Scaling-up Institutional Investment for Place-Based Impact’ (May 2021) - a partnership initiative with the Impact Investing Institute, Pensions for Purpose, City of London and Big Society Capital. We believe that our white paper’s model of PBII is ideal for building a GDE in this country, nationally, regionally and locally.
Combining financial, organisational and social innovation, the PBII model has generated widespread policy and market interest. We are seeing a rapid rise in interest among our investor clients and members of the PBII Forum in investing in key sectors – affordable housing, agriculture, clean energy – that can achieve both positive impacts and financial returns.
Importantly, we are seeing conversations shift from investment teams setting up new “impact products” to deeper and more engaged conversations with board members and leadership teams about strategy and the choices and decisions required to invest in ways that reduce systemic risks and create long-term social and environmental value. There is a real appetite for knowledge and learning about what impact investing means in practice.
To move from the drawing board to practice, TGE is launching a “PBII Innovation Lab” in partnership with the Institute of Economic Development (IED) and Pensions for Purpose. The Lab will create solutions-focused ‘walled gardens’ that bring together local stakeholders, financial practitioners and experts to generate investable PBII projects.
First-wave PBII projects are already being planned in a number of regions. Asset managers and asset owners and local authorities and anchor institutions can interact directly and openly in these ‘common rooms’. That is how PBII innovation can happen and spread. Parallel to the first wave projects, we are building a PBII Knowledge Community as a national network of PBII pioneers.
Its practical challenge is to scale up institutional investment as a powerful driver of change in the real economy at all levels. With its place-based philosophy, it will directly engage local businesses and communities in investment projects that can improve economic, social and environment well-being in their areas.
Scaling up PBII is ideal for building a future-proof GDE – exactly what the UK needs to set about doing as a matter of urgency. 2030 is too far off. We can set meaningful 1-2-3 year milestones by signalling intent and signing up. Lighting a spark doesn’t take 10 years!
This blog was originally posted via The Good Economy on 10 March 2022. Learn more about The Good Economy. All articles posted on this blog give the views of the author(s), and not the position of the IPR, nor of the University of Bath.
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