To undertake renewal of the physical, social and economic fabric of deprived neighbourhoods, investing responsibly in projects and people.
1. The Social Problem
Multiple deprivation is a complex problem which threatens the stability of society. It is comprised of compounded issues which are aggravated when inter-generational. In an increasingly urbanised world, these issues affect both developed and emerging economies.
Although poverty has reduced globally over the last 30 years, 80% of humanity still lives on less than $10 a day. Inequality of income is often worse within countries than between countries and is increasing, notably in the UK which has one of the highest degrees of income inequality amongst developed countries, second only to the USA and nearly twice that of Sweden.
Due to the deep global recession of 2009, the UK has experienced a contraction in private sector activity and an increase in unemployment. With the UK’s highest-ever budget deficit, the Government will inevitably have to impose spending cuts, resulting in further public sector job losses and an economic slowdown for businesses dependent on public sector contracts. There will be reduced provision of infrastructure and services essential for the proper functioning of civil society. This will make the situation worse, not better, with deprivation and inequality increasing.
These socio-economic problems will escalate into conflict if left to fester – history has proven this.
“Income inequality has risen (on most measures) in each of the last three years and is now at its highest level since our comparable time series began in 1961.”
– 2009, Institute for Fiscal Studies, Poverty and Inequality in the UK.
“Hundreds of thousands of public sector jobs look set to go as government departments other than health face their biggest and fastest spending reductions of modern times – a mighty 25 per cent reduction over four years.”
– June 22 2010, FT, Public sector faces huge job losses.
“The growing gap between [the middle-class] and a small number of highly visible super-rich individuals might fuel disillusion with meritocracy, while the growing urban under-classes are likely to pose an increasing threat to social order and stability, as the burden of acquired debt and the failure of pension provision begins to bite.”
– 2007, UK Ministry of Defense, the DCDC Global Strategic Trends report.
Three things are required for urban areas to recover from socio-economic decline through successful urban development:
- Economic stimulus and the promotion of local enterprise;
- Strategic capital projects such as enabling infrastructure and public realm enhancements; and
- Social programmes designed specifically to tackle local problems.
– supported by findings of the Joseph Rowntree Foundation and the Young Foundation.
JenLi will take a holistic approach to providing these key ingredients by funding capital projects (e.g. enabling infrastructure and urban regeneration) and social programmes (e.g. health, learning, skills training and sport), stimulating the local economy and providing support over periods of time which are long enough to allow positive change to be embedded. The JenLi Foundation will fund initiatives which would normally expect government funding but where this is not available and where the private sector is unwilling to step in.
Real estate can provide a robust asset class with good revenue streams and capital growth (when adjusted for cyclic volatility). If it could be harnessed within a comprehensive Third Sector model, then a step change could be achieved in the amount of capital which can be attracted and leveraged to enhance the role of the Third Sector in building self-sufficient communities.
The model harnesses philanthropic capital (including major donations, aid monies and patient capital i.e. long-term equity) to underwrite risks in the initiatives it will fund. The emphasis on social benefit may be perceived as adding to the risk of achieving a satisfactory financial return; in reality, the comprehensive nature of the JenLi model reduces and mitigates risk, thereby opening the door for investment capital (private or sovereign) seeking a balanced approach. This structure also facilitates the use of debt.
The resulting leverage will create a four-fold increase in capital available, almost all of which can be dedicated to the Foundation’s mission. As a comparison, charities and foundations which operate an endowment model direct only about 5% of their corpus towards purpose every year – JenLi will direct approximately 400% to purpose.
Who are the beneficiaries?
The beneficiaries will be communities. JenLi will help the disadvantaged, distressed and disaffected – the most vulnerable in society – to build self-sufficient communities, it will do this by operating at a community scale in tackling the root causes of poverty and deprivation. It will fund initiatives which would normally expect government funding but where this is not available. There is preliminary interest from the Cabinet Office and Big Society Bank Team to explore whether the JenLi concept is suitable as a business model for the Big Society Bank to best harness and leverage unclaimed banking assets.
Who are the customers i.e. capital providers at commercial exit?
JenLi can recoup capital at commercial exit, timed to coincide with market peaks, to release the maximum value accruing as a result of its initiatives. Customers will be private sector businesses, investment funds or individuals:
- Capital receipts from infrastructure, land, property and business asset sales or refinance, wholesale or phased to the market; or
- Revenue from infrastructure concessions, licenses, service agreements, ground rents, service charges and rents.
Windfall gains and operational surpluses can be harnessed to create further social benefit on exit through the transfer of surplus assets or capital to local cooperatives, foundations and the like.
3. Social Impact
How does JenLi measure and monitor the social impact?
JenLi has developed bespoke project evaluation techniques and operational procedures to ensure that demonstrable social outcomes and maximum “social bang for the buck” is achieved. The evaluation toolbox includes:
- Rigorous project screening to ensure that need and social deprivation is accurately assessed at the outset, and that only those projects with genuine need are supported.
- Development of project specific metrics to set target outcomes up-front, and continuous measurement of outcomes against social, economic and environmental parameters – the “triple bottom line”.
- Stringent management regime including progress measurement, feedback and corrective action throughout the process to ensure that targets are being achieved and that poor performing projects are brought back on track.
JenLi subscribes to the principle that “Social Impact” equates to the “Measure of Change”, defined as follows: Evaluate all results, intended or not, minus what would have happened in any event, and compare the result with the intended goals.
As a basis for its evaluation tools, JenLi has used and further developed methods and parameters of highly-respected institutions such as Rockefeller Philanthropy Advisors and Global Impact Investment Network.
Demonstrable social impact
JenLi is a nascent organisation; it has not completed any projects. However, there is a very high quality/high impact correlation in the neighbourhood renewal and other development projects completed by the founders and members of the JenLi team, some of whom are respected international advisors on such issues, see Section 5. JenLi is founded on precepts widely accepted as successful:
- Comprehensive action: cities across Europe and the USA required a “carefully brokered and multi-facetted plan” to recover from socio-economic decline, see Section 2a above.
– the Joseph Rowntree Foundation
- Social programmes supporting capital projects: the only way to tackle entrenched deprivation on UK housing estates is to “focus more on supporting the social and emotional needs of people living in deprived areas, as well as physical development”.
– the Young Foundation
- Layered fund structure: leveraging “Impact First” capital with “Financial First” investments can achieve “significantly more social impact”.
– Bridges Ventures
- Long term finance: is critical to facilitate the amortisation of the high up-front cost of infrastructure, and that long-term finance is essential in scaling up infrastructure provision.
How will JenLi’s social impact increase in the next 12 months?
Once the JenLi Fund has been capitalised pursuant to a fundraising campaign, the Foundation will begin to implement pilot projects across the UK, aiming to improve the lives of thousands of the most vulnerable people in the UK.
Furthermore, JenLi will actively engage the Big Society Bank team with a view to it adopting the JenLi model (or variant thereof) as an important component of its business model, allowing it to leverage substantially the initial capital obtained from unclaimed bank assets, and thereby significantly increasing the amount of social impact possible.
JenLi will attract off-shore investment capital (eg “non-dom” liquid assets) to specifically invest within the UK, substantially enhancing the amount of capital available in the creation of social impact. Over time, and after maximum social impact has been achieved, investment principal and ROI will be returned to source via a transparent and tax-sheltered investment vehicle.
JenLi will scale up and replicate the model in the UK and globally, ensuring that adequate legal and financial “firewalls” are introduced between projects and jurisdictions.
Similar work at a much smaller scale is undertaken by organisations such as Bridges Ventures, the Camberwell Project, the City Parochial Foundation and the Ethical Property Company. However, none use the JenLi funding model which facilitates operations and social benefit on a much greater scale for transformational impact.
Public funds have been invested in community-based initiatives via municipalities and Government agencies; going forwards, however, these sources of funding are uncertain. EU funding has been available but this too is under severe pressure
Private sector regeneration funds such as Igloo and the 3i Infrastructure Fund do not take the breadth of approach which JenLi advocates, nor do they commit resources for a duration which JenLi believes is sufficient to tackle embedded issues.
Private sector providers are not able to prioritise social outcomes over financial returns and few other organisations have a sufficiently holistic financial and operational model to achieve the transformational change required.
Some global foundations such as the Aga Khan Foundation operate comparable models. They are not direct competitors as they focus on beneficiary groups outside the UK.
There are international parallels with development agencies and the International Finance Corporation when in grant-making mode. Otherwise, recipient Governments are simply taking advantage of long-term loans.
5. The Senior Team
- The Rt. Hon Sir Richard Needham
UK Minister in Northern Ireland from 1985 to 1992, accredited with redesigning and rebuilding Northern Ireland’s shattered towns and cities, widely recognised throughout Northern Ireland as “responsible for turning around and regenerating both the North’s infrastructure and economic base”.
- Roy Adams OBE
Awarded an OBE for economic development and community relations in deprived communities in North Belfast. where he chaired a government advisory panel for the redevelopment of the former Crumlin Road Gaol site, a project set in the heart of some of the most notorious neighbourhoods and deprived communities in Belfast. He has worked on many urban regeneration projects throughout the UK and in France and given expert advice on development projects in Japan and Norway.
- Karl H Richter
Led the research and development of the JenLi model, investigating organisational and financial models as well as capital structures which can be deployed on urban regeneration projects and which seeks out both social and financial outcomes.
JenLi is in discussions with the Skoll Centre for Social Entrepreneurship at the University of Oxford to jointly undertake a research exercise which will demonstrate how the JenLi model can be implemented in practice. The work aims to:
- Verifiy that the model is robust through benchmarking and stress-testing.
- Develop a blueprint to demonstrate how the model can be deployed.
- Evolve an incontrovertible case for support which will attract capital.
- Prepare guidance for how the model can be scaled up and replicated.
6. Progress to date
The JenLi model has been developed to “proof of concept” stage.
The model has been submitted to numerous practitioners and field experts for critique and has received constructive and positive responses from, amongst others: JP Morgan, Credit Suisse, Schroder Investment Managers, CB Richard Ellis, Charity Bank, Social Finance, Charity Aid Foundation, VentureSome and the private equity mogul Jon Moulton.
Articles of Association have been agreed with the respective authorities which will register and oversee the Foundation. The articles empower JenLi with a high degree of financial service capability for a 3rd sector organisation: JenLi, as both a non-profit and charitable organisation, will be endowed also with characteristics of a Merchant Bank, Investment Bank, Fund Manager and Development Agency.
JenLi has received contributions in kind and pro bono advice from organisations and individuals, demonstrating confidence and enthusiasm in the model.
7. Future plans – next 12 months
- Complete the JenLi/ Skoll research project as part of an incontrovertible case for support.
- Prepare robust financial models to analytically and quantifiably demonstrate long-term commercial projections.
- Finalise donor and investor prospectuses, and commence formal fundraising.
- Initiate pilot project/s pursuant to capitalisation of the fund.
- Scale up and replicate the model in the UK and globally.
- Lobby Government to amend legislation to encourage greater philanthropic giving and social investment. (Note: there are currently no legislative impediments to launching the model, although amendments to legislation will make the model more efficient.)
JenLi will establish a venture fund which will fulfil its social purposes by investing in strategic and enabling infrastructure assets in order to create a pipeline of downstream value opportunity across land, property and business enterprises.
JenLi is presently determining the optimal initial capitalisation level for this Fund and in doing so will also formulate its detailed financial projections, including project and operating budgets, much of which depend on the initial sum raised which it is hoped will be in excess of £100 million.
9. Nature of support required
JenLi requires three kinds of support:
- Funding to complete the research piece which enables the JenLi Goal, Mission and Model to be seen together as credible, robust, socially significant and of driving importance.
- Applied knowledge in establishing the fund in all its aspects – placement and structure, call for investment, capitalisation and management.
- Investment capital to take projects from conception to creation in low-risk ways which yield commensurate returns in terms of social as well as financial benefit.
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