By Jas Bains, Hafod Chief Executive
For a long time, I've expressed reservations about the insularity of the culture that has come to dominate the Housing Association sector. A personal reticence to attend housing conferences for more than a decade is not born of arrogance, but of disappointment hearing from the same type of people, conveying the same type of messages, give or take a degree or two. Kudos to the likes of Ian Wright Chief Executive of the Disruptive Innovators Network (DIN) who are determined to break the mould by widening exposure to the corporate world and challenging some of the conventional orthodoxy that seems to beset the sector.
I too have an insatiable appetite to explore new frontiers, it's part of my DNA. A constant quest to discover new sources of knowledge, innovation and wisdom, and seek to translate that into the day job. Most recently, this has taken me into the world of impact investing. This Housing Futures 5 emerges from my attendance at the Impact Europe Conference 2023 in Turin in November, where I attended as Chairman of Kindred an impact investment fund based in the North West of England.
So what is impact finance? It combines public, private, philanthropic, other types of catalytically capital and is driven by different levels of risk but sharing common impact objectives. And those objectives are driven to increase prosperity and social progress for all, to fix inequalities, injustices and preserve the planet. The beauty behind the collaboration is where else are you likely to find like minded billionaires, venture capitalists, charitable foundations, philanthropic and endowment funds, pension funds and not-for-profit organizations working in partnership for the common good?
It's a little understood fact that the UK has a significant impact investing market, according to big society capital, the size of the UK impact investing sector is 9.4 billion in 2023. Of which Housing Associations make up a very, very significant part. At the other end of the spectrum, the smaller end are enterprising sustainable businesses addressing those issues of food security, digital exclusion, fuel poverty, adult social care, childcare and environmental damage.
Now my own theory why Housing Associations fall outside of the impact investing narrative is, first of all, they view themselves as primarily real estate players, which tends to attract a certain form of institutional capital, typically, but High Street banks. Secondly, we prefer crafting a narrative aligned with CSR and more latterly ESG, both of which are becoming increasingly outdated. Thirdly, we lack the vision and ambition to explore new forms of investment outside the safety of known grants. Fourthly, I'd say there's a reluctance to tackle too many social problems. The wider the scope, the more people the Housing Associations are reluctant.
There are a number of reasons why I believe this approach to be short sighted. Let's take a couple. First of all, in relation to governance, in terms of unprecedented regulatory pressures, there is a danger organisations think it's all about compliance reporting. More learned people than me talk about this being an inflection point, where we seek the minimum common denominator and being unable to identify what it is that is really material rather than counting everything that moves. A case of hitting the target, missing the point. Gabriela Ramos, at Unesco has really apt quote to sum up this “you measure what you treasure and you treasure what you measure”. Ramos advocates for more impact, not more reporting. Asks by more reporting what is changing and that data scarcity is around data, not per se, but data that really matters. Others such as the Saïd Business School in Oxford University argue impact metrics need the same robustness as financial metrics which have benefited from long establishing internal and external internationally recognised processes. I'm somewhat comforted. Recently I was in the company of Professor David Halpern, Behavioural Psychologist, who established the Nudge Unit in 10 Downing Street. He believes that advances in the sophistication of impact metrics mean they now carry greater weight than previously and that is also confirmed by extensive work at an international level.
So the question for Hafod, in our pursuit of the new strategy, how do we better demonstrate connectivity between our organizations impact and our financial health? The second area I want to explore is strategy. As part of the new strategy we have a broad organizational consensus in potential value of developing new interventions. That's based on buildings sustaining neighbourhood scale, social infrastructure, ie community kitchens, shared energy zones, well-being hubs, etc. Building on strong evidence that social infrastructure at a community level generates both financial and social interns, including those associated with better health, well-being, employment, education and general self esteem and confidence outcomes. So the question for Hafod is, could Hafod create and pilot an impact investment fund on a de minimis basis with the principal purpose to address need and to generate a sustainable financial return. The emphasis will be placed on targeting communities not benefiting from existing provision and most likely to require a capacity building element. A secondary principle might be to encourage innovation, community leadership networks and capacity building alongside financial investment. We would also need to give consideration proportionality as a key consideration in the approach to value measurement and reporting. Avoiding overburdensome evaluation and monitoring and allowing communities to take healthy risks and be guided by their insight and need and focus on the activities that matter.