Birmingham (UK) — Future-Fitting Streets

Financing sustainability transitions: in search of a new, civic-led orthodoxy

Place: Ladywood in Birmingham, UK
System Type: Neighbourhood
Challenge: Future-Fitting Streets (with a particular focus on infrastructure)
Partners: EIT Climate-KIC, Dark Matter Labs, CIVIC SQUARE, Thirty Percy Foundation, Lankelly Chase Foundation


This is an abridged version of the departure blog for our prototyping work in the Ladywood neighbourhood of Birmingham (UK). You can find the full article here.

Finance at the Climate Crossroads

Since the signing of the UNFCCC’s Paris Agreement in 2015, $3.8 trillion has been invested in fossil fuels, and much of the money set aside to “build back better” will not address climate change. And while “Sustainable Finance” has emerged in response and has seen significant expansion over the past decade, ESG investing is unlikely to lead to transformative change of the kind required.

This is why the TransCap Initiative argues that we need to think beyond the singular goal of investment as a means for capital to multiply itself and to view the world through a systems lens, thereby focusing on real assets in the places where we live, work and play.

Transformation capital intends for investors to deploy capital primarily to create change dynamics that propel a (real-economy) system in a specific direction, both in order to set the system on an environmentally and socially sustainable footing as well as to enable the continued multiplication of capital in the long run.

But how does that manifest locally?

And how does it interact with those who live within the systems these investments seek to change? How can we better connect the financial system to communities in a way that serves them rather than relegates them to a source of value extraction? How can we ensure relationships prioritise wellbeing, social justice, and ecological regeneration?

These are some of the questions at the heart of our exploration in the Ladywood neighbourhood of Birmingham (UK).

The Nexus of Financial Capital and Community Capital

Conventional investment portfolios systematically avoid opportunities to generate compound value (both private and public) by remaining purposefully divorced from the tangible and intangible assets embedded in communities themselves. Furthermore, they are not composed in a systemic manner through which individual assets can be brought into synergistic relationships with each other so that they generate multiplier effects that amplify their value to the community.

A simple example might be a residential fund investing in a rental portfolio in a neighbourhood. The fund manager knows that the attractiveness of the place and the success of the investment is partly based on the sense of community and safety as well as the quality of nearby parks, schools, shops and transport connections. But there is no mechanism or incentive for these connections to be made.

While financial capital is a powerful lever in driving a system’s behaviour, there are other types of capital important to society’s sustainability transition. One of them is “community capital”, which manifests in different ways. It can take the form of the relationships of trust within communities that facilitate coordination and cooperation for mutual and civic benefit. It can be the organisational and institutional infrastructure in which deliberative and decision-making capacity lies within a community and amongst its members. It can even be the combined financial and social investment potential of a community to generate multiple shared values from collective civic action.

#TheBigLunch weekender at The Front Room, South Loop Park, Birmingham
#TheBigLunch weekender at The Front Room, South Loop Park, Birmingham (Credit: CIVIC SQUARE)

These types of community capital are rarely aligned in a purposeful way with financial capital flows, sustainable or otherwise. And yet these types of capital and human-to-human interactions are the bedrock of real value creation in our neighbourhoods and communities.

Worse yet, there has been a historic and turbulent relationship between financial capital and the people and places it shapes. Extractive models of financial investment have bred distrust and often directly contributed to the inequities at the heart of the crises we face. Whether it’s through housing developments that privilege profits over affordable, green and comfortable living for all, or high-street chains motivated by shareholder interests over those of the community, the long-term risks associated with these investments are socialised and the rewards are privatised—the 2008/2009 Global Financial Crisis serving as a powerful reminder.

As technology advances, these harmful power imbalances risk being replicated further and faster. The incentives, values and ownership models baked into finance will play crucial roles in the means of creation and distribution: how behavioural data from mobile phones, public spaces and smart homes are owned and used; or how Artificial Intelligence is developed and applied to our everyday lives; how gene editing is applied and owned in our food system; or even how social media and other online platforms that breed polarising content, unsustainable consumption patterns and mass disinformation structure their business models. Whatever the scope of the transition, how it is financed matters.

This makes it all the more crucial to see sustainability transitions and the finance that drives them through an economic, political, cultural and social justice lens and recognize that these transitions happen alongside—and not isolated from—other structural shifts in society. In other words, sustainability transitions are not just about carbon neutrality, but rather a need to move away from the prevailing logic of an environmentally and socially extractive economy towards a regenerative and inclusive economy capable of fundamentally addressing the most tangible and pressing challenges of the 21st century.

Rewiring Capital and Value

Rebalancing this relationship between communities and finance requires more than just new capital formations, new funds and new grant structures. It requires the systemic rewiring of capital itself, away from asymmetric power, control and value extraction, towards more distributed and democratised forms.

It also requires a rewiring of how we see value. Reconfiguring the relationships between financial capital and community capital can unleash the multiplicity of equitable returns and co-benefits, recognising that value flows from investments can take many forms, but too few are incorporated into conventional financing models. Reductions in liabilities, for instance the health risks associated with fuel poverty, are rarely accounted for fully. Longitudinal and intangible outcomes, such as increased social resilience from one generation to another, fail to be valued fully when investment decisions are made. The failure to capture these values reinforces a warped view of what constitutes a “good” or “bad” investment.

Bridging the Impact Investment Gap: Infrastructuring Tomorrow
Bridging the Impact Investment Gap: Infrastructuring Tomorrow (Credit: Dark Matter Labs)

If our finance systems are to go beyond capital formations motivated largely by short term, narrow economic returns alone (financial ROI / social ROI that use conventionally static or negatively biased discount rates), and begin to recognise the multiple civic returns possible, there is a need to explore new ways of measuring, accounting and financing for civic value creation for a new symmetry of power and mutuality. It is in this rewiring of capital and value that we can create the systemic conditions for just transitions.

Our Exploration

The intersection of new investment logics, new forms and flows of value, and the tangible and intangible assets in our communities is where the work in the Ladywood neighbourhood of Birmingham (UK) sits. It is where we seek to further unpack and explore the tensions and contradictions that their combination surfaces by testing and validating key components of each, and how they intersect.

The aim is to generate insights and learnings relevant to a diverse range of place-based transitions. While the transitioning of, for example, urban neighbourhoods towards a just carbon neutrality and universal wellbeing will be different to transitioning rural land systems towards sustainable and ecologically enriching uses, there will be common challenges and relevant points of connection to draw from.

In this work, we have purposefully brought together a collaboration that spans a diverse set of vantage points, knowing that diversity is strength and that to work in complexity is to embrace entanglements and often conflicting perspectives. This collaboration includes EIT Climate-KIC, Thirty Percy Foundation and Lankelly Chase Foundation, Dark Matter Labs, and CIVIC SQUARE. Its strength is that each partner brings perspectives and assumptions that have some common ground but aren’t completely aligned. The point is to collaboratively explore the tensions that arise and, from a position of empathy and humility, work towards reconciliation that can further the cause we broadly share.

Our Shared Enquiries

To guide us over the next 6 months, we have co-developed a set of shared core enquiries that capture what we feel are fundamental questions that need further exploration.

  • How can we best challenge the modus operandi of investors and guide those with aligned intentions towards new logics, practices and instruments adaptive to different contexts, communities and scales of transition?
  • How can we best build the capacity for change amongst communities, intermediaries and investors that address historical tensions between capital and societal interests, as well as legacy lock-ins that remain deep-rooted causes of the crisis?
  • How can we best develop new financial, technical and participatory innovations, which not only systemically rebalance the agency of change from financial capital towards community capital, but are transferable/translatable across multiple different boundaries and scales of ownership (e.g. urban neighbourhoods but also rural land / bio-regions)?

What sits behind these three leading enquiries are a set of cascading enquiries that represent our collective ‘hunches’ for where further work could have value.

  • How might we best build the capacity for change amongst communities, intermediaries and investors that address historical tensions between capital and societal interests, as well as legacy lock-ins that remain deep-rooted causes of the crises we face?
  • How might we navigate the tension between urgency for action and the deeper shifts required to deliver equitable systemic change that is grounded in historic and cultural inequities?
  • How might an ecosystem of investors be nurtured to provide different types of capital that serve local, just climate transitions in different ways?
  • How might new investment logics address ownership, wealth and power concentrations that drive extractive models of financing, while supporting new economic thinking relating to revenue, risks and returns?
  • How might '"participatory imagining" practices help establish investments with shared intention, in a way that builds legitimacy across all stakeholders involved?
  • How can new ways of measuring the quality of investments drive rigour and legitimacy (and comprehensively account for its multiple benefits beyond financial ROI?
  • How can minimum viable prototypes, proxies and proofs of possibilities help make abstract concepts and ideas around new investment logics tangible to a diverse group of stakeholders?

Next Steps

We have recently kicked off our inquiry and will report on our progress through week notes, which are published here.

How to Engage

If you want to learn more, contact Tom Beresford at Dark Matter Labs (lead coordinator), Andy Kerr at EIT Climate-KIC, Immy Kaur at CIVIC SQUARE, Jen Hooke at Thirty Percy Foundation, Dominic Burke at Lankelly Chase Foundation, or Dominic Hofstetter at the TransCap Initiative.



Engage

Challenge Owners

Do you represent an ambitious city council, regional or national government, multilateral institution, foundation, or another organization with a mandate to transform a human or natural system?

Contact us to learn more about systemic investing and funding architecture in service of your climate action plan.

Investors

Are you an asset owner, an investment advisor, an asset manager, or a financial intermediary looking to explore the next frontier of sustainable finance?

Reach out to learn more about systemic investing and to discover investment opportunities.

Innovators

Are you working on a novel idea, concept, space, method, strategy, tool, structure, philosophy, or metric relevant for building the field of systemic investing?

Get in touch to find out how to engage in our prototyping work and how to contribute to our community of practice.

Funders

Are you interested in supporting the design and mainstreaming of a new investment logic that challenges existing financial paradigms, structures, and practices?

We’d love to hear from you.

Join the Network

Contact Us

Dominic Hofstetter, Space Building Lead
dh@transformation.capital

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About

What We Do

The TransCap Initiative is a collaborative space for developing, demonstrating, and scaling systemic investing in the places that matter most for human prosperity—such as cities, landscapes, and coastal zones—as well as in value chains and other real-economy systems.

We apply systems thinking, human-centred design, and the principles of mission-driven innovation to explore how financial capital can catalyse the transformation of systems in service of a low-carbon, climate-resilient, just, and inclusive future.

Our mission involves developing a knowledge and innovation base, testing novel concepts and approaches, and building a community of practice. In doing so, we recognise the complex adaptive nature of human and natural systems and the fundamental uncertainty that governs their evolution, and we thus emphasise the need for collaboration, experimentation, and learning.

The places and value chains we intend to transform act as centres of gravity for our work. In each of these systems, we will work with challenge owners, communities, innovators, investors, and other stakeholders to design, structure, and finance strategic investment portfolios nested within a broader systems intervention approach.

Who We Are

The TransCap Initiative convenes a diverse community of partners from the private, public, civic, academic, and philanthropic spheres. Many of our community members are world-leading thinkers and doers in the fields of systems innovation, sustainable finance, public policy, social innovation, and sustainability research. It is a dynamic community, open to anyone committed to our cause and values.

The TransCap Initiative was initiated in 2019 by EIT Climate-KIC with support from the European Institute of Innovation and Technology (EIT).

Learn More

Contact Us

Dominic Hofstetter, Space Building Lead
dh@transformation.capital