Develop resilient, and self-sufficient financing arrangements

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Develop Resilient and Self-Sufficient Financing Arrangements

❖ “We need to consider the intention behind private investment in just sustainable initiatives.” “Greenwashing, green gentrification, etc. can be a trap.” ("Berlin" Arena, 03.2021)

❖ “Proof that alternative economic models can work is important.” ("Berlin" Arena, 03.2021)

❖ “[There is a] need to change the funding mechanisms: now we are focusing on innovation and starting something new. Need to be more focused on sustaining and maintaining initiatives.” ("Berlin" Arena, 03.2021)


General ambition

Many community-led initiatives for sustainable and just cities rely on public funding (subsidies, grants, etc.) to carry out their activities. However, changing political priorities and economic crises can restrict this funding. Such intermittent and unreliable funding poses existential challenges to organizations ("Berlin" Arena, 03.2021).

A financing arrangement that contains a well thought-out value proposition, and viable mechanisms for delivery and capture, as well as assessment of risks (such as over-reliance on specific sources of funding), will make an organization more financially resilient in the face of austerity. However, this is no easy task, since many community-led projects serve low-income residents and therefore cannot rely on beneficiaries as a source of revenue Additionally, since funding sources and business models (often) also reflect the values of the organization using them, community-led organizations and projects may have to think carefully about accepting funding from larger institutions or private sector investors, which might conflict with their own political views and environmental and social goals ("Berlin" Arena, 03.2021).

Short-term, conditional funding from governments or larger institutions can also threaten to “projectify” an organization’s work or mission ("Berlin" Arena, 03.2021). However, high quality interventions can also be relatively low-cost (or even free!), in both start-up and maintenance, which reduces investment risks and administrative burdens without undermining potential positive impacts ("Berlin" Arena, 03.2021).

Income diversification (through events, membership fees, etc.) and co-financing are important ways in which organizations can diversify their revenue streams. Some community initiatives are also experimenting with and adopting alternative economic strategies aimed at increasing organisational resilience. These include a variety of legal forms with different social impact models, from cooperatives to community benefit societies, and in some cases demonetization: for example, through resource sharing ("Berlin" Arena, 03.2021) or adopting “sweat equity” and time banking schemes ("Berlin" Arena, 03.2021). There are also expanded definitions of “value” that can validate projects’ social impact: for example, value definitions that take into account externalities (e.g., reduced burden on social safety nets) or economic assessments of non-monetary community resources can help to justify funding ("Berlin" Arena, 03.2021).

Governments also have the responsibility to support opportunities for more stable, long-term financing. Through procurement and partnership, governments can provide structures for alternative financial models to thrive and sustain projects over longer periods of time ("Berlin" Arena, 03.2021).

Examples

Inner-city community energy in London

After the steep decline and cancellation of the feed-in-tariff subsidy for community energy, Repowering sought out alternatives such as private investment and conducted pilot projects for a peer-to-peer energy trading system (Q24). Repowering took measures to reduce exclusion of low-income residents by keeping the threshold investment for members relatively low, around £50. By making the project more inclusive through low barriers to entry, community workshops, and open general meetings, they were also able to increase their community support base. They also created a Community Energy Efficiency fund for non-investors (Q16b).

Learn more about this intervention:


Citizens rescuing and sharing food in Berlin

Foodsharing is run by unpaid volunteers, including developers, food sharers and food savers, and refuses any public funding or subsidies. Relying on internal resources is part of the political identity of the organization as it tries to operate without financial transactions. Foodsharing members promote the “free”.

Learn more about this intervention:


Community Land Trust Brussels

Although the Brussels Community Land Trust (CLTB) faces obstacles in growing their budget in tandem with their organization, their revenue streams are highly diverse and thus could be resilient enough to maintain stability if one funding source dries up. While 40% of the budget comes from government subsidies, the other 60% comes from a variety of sources: grants, household mortgages, membership fees, ground leases, crowdfunding and donations (Q21). Importantly, CLTB launched the cooperative “Common Ground” [1] in January 2021, which partners with the social economy sector to attract private and citizen finance for land purchases and management under the Community Land Trust model. Finally, the CLTB’s first project was their pilot, but with a proven business model they are now eligible for additional, long-term support.

Learn more about this intervention:


Superblocks in Barcelona

The superblocks interventions are seen as a relatively low-cost, high-impact initiative (Q25). The highest expenditures were on upfront costs for construction and reworking city transport, with few additional costs for maintenance. Furthermore, because the superblocks project is embedded in many other sustainability and development plans in Barcelona, their funding is relatively secure (Q26a).

Learn more about this intervention:


For interesting examples of business models for Nature Based Solutions, see the NATURVATION project’s Business Model Catalogue [2].

Some action idea(s), examples, and resources from UrbanA’s "Berlin" Arena (03.21)

❖ Develop guidelines for ethical public procurement supporting sustainable and local circuits of value.

❖ Use and/or acknowledge beyond-financial assessments of value, like Social Return On Investment.

❖ Set up time-banking or similar schemes to reward volunteering and/or enable sharing of resources.

❖ Local coins, such as the ‘makkie’ in Amsterdam, can be issued in exchange for voluntary work: https://www.makkie.cc/

❖ Low-cost models to address urban hunger, like that of Food Not Bombs, are based on collecting leftover food from markets, cooking it, and sharing with those in need: https://foodnotbombs.net/new_site/


That is not all! Additional insights from the “Berlin” Arena are included throughout this Enabling Governance Arrangement.

Relation to justice in urban sustainability governance

Developing resilient and self-sufficient financial arrangements for urban sustainability and justice initiatives may address the consequences of Unquestioned neoliberal growth and austerity urbanism. This refers to processes of privatization, commercialization, budgetary cuts and state withdrawal from various sectors. While this arrangement does not address the root causes of neoliberal austerity urbanism, it may lessen its impact on urban sustainability and justice by enabling initiatives to remain financially viable and therefore able to continue their operations. However, special care will need to be taken to ensure that these financial schemes do not exclude low-income groups who cannot afford to pay for the benefits of the initiative themselves and are of little interest to potential sponsors.

Critical reflection

While developing a financial arrangement that is able to remain viable in the face of public funding cuts and other effects of economic crises may make an initiative more resilient and therefore able to continue delivering benefits to communities, it may set a precedent for underfunding similar initiatives, thus downplaying state responsibility for collective welfare. In other words, public authorities may be tempted to limit public funding and support in the future if they see that organizations can “make it on their own”. This could in turn reinforce injustices associated with neoliberal practices.

Some community organizations may also not have the capacity or flexibility to develop alternative financial arrangements, as they may be restricted to certain operating methodologies ("Berlin" Arena, 03.2021). There is also a risk that projects in low-income communities cannot afford to support initiatives financially nor gain the necessary start-up investment if the project is unproven. Community members may be hesitant to invest in a project without a sense of trust that they will receive a return on their investment.

Example

Inner-city community energy in London

One notable obstacle was the difficulty raising funds (£58,000) from community members for the first solar project. Since it was a new initiative, with no track record, individuals were hesitant to invest. Additionally, while many residents made pledges, this proved not to be a reliable indicator of actual financial support. Once the project was established, it was easier to find investors for other projects because the community had more trust in the organization and had seen an example of its success (Q23d).

Learn more about this intervention:

Covid-19 connection/How does this enabling arrangement play out under the conditions of a pandemic?

The Covid-19 crisis has highlighted the importance to any initiative of developing resilient financial arrangements. In such a crisis, sources of funding are directed to new and immediate priorities such as health care and social support. In the longer term, economic recovery stimuli may be positive for urban sustainability and justice initiatives if directed towards a just and green recovery (check out Carbon Brief’s tracking of green recovery plans [3]).