Written by Shane Arthurson
Imagine capital from a community being used to own a project in that same community.
This is a part of what Place Based Capital is. It includes solutions like inclusive financing structures where you can own the local strip of shops you visit, you can own the local renewable energy project that you use, you can own a local housing project that you live in, you can own a local childcare centre your kid attends.
Place Based Capital makes sense, because the people using the project are the investors in the project. That creates utility and so in addition to a financial return you get a utility return.
Imagine if, as a community, you needed an Early Childcare Centre and there wasn’t currently one in your area. Then, you create it with Place Based Capital. You now get to use the service, you get all of the benefits of ownership, like having a say in how the business is setup and how it is run. And… wait for it…. this means that the place based investor can do something no other investor in history has ever done, lower their financial returns because they are in fact getting a utility dividend, this is truly the only form of concessionary capital and is true impact investing.
Place based capital is harmonious because the benefits and the cost are collocated. Let me explain with an example. Imagine if we all had to bury our rubbish in our backyard everyday – we would be the best recyclers. Now apply this to finance. In the example above, imagine a large private equity firm out of USA owns the child care centre and rates are high. This means that the financial cost (the high rates), are borne by the local community, but the financial benefits are in the USA. This dislocation of costs and benefits creates friction and bad outcomes. Because you are not the owner, you don’t get the transparency of the flow of funds, you don’t even know how much profit they are extracting.
Place based capital has enormous potential, it:
- makes finance functional
- brings communities together
- educates
- addresses wealth inequality
- truly is concessionary because of utility
This is fairness, this is distributive justice, this is true ethical capital.
Can you believe we don’t have a community ownership vehicle in the legal or tax system, Government, if you are listening, we need these mechanisms and we need incentives to strengthen place based capital. We need to acknowledge that the current capital systems leads to monopolies and wealth inequality, so join us to strengthen Place Based Capital.
Imagine if the polycrisis could be solved with Place Based Capital. Lets try… it’s fun to try.