Toolbox:
hints & hacks to build democratic money yourself
In addition to the philosophical and ethical ingredients of democratic money, there are some practical things that you’ll probably need if you’re going to make it work as well as some of the examples we’ve seen.
The practical things fit into the three categories you might expect: people; money; and processes.
People and Money
Before getting into processes, there are a few guiding thoughts on people and money that our examples and experience say you might need:
Processes
With an activated community, an anchor funder, and an assembly of people and organisations, some of the tools of democratic money can help the process flow:
A Bullseye Model
A Bullseye Model helps visualise what the community in control of democratic money will, and won’t, accept for where it is put to use. For example, in the example of BD Giving, the community steering group decided that it wanted to target money at charities and social enterprises delivering social impact in Barking and Dagenham (the centre of the bullseye for them).
It’s an intuitive way of thinking about the impact communities want to have with the money they control. What’s at the centre, the bullseye or sweet spot? What’s good but not as close? What’s off-target? And what’s off-limits? A bullseye helps communities have that conversation and, later, measure how much money is in which tier; which leads to a conversation about how to move more and more money towards the centre.
BD Giving added another layer (something called sliders) to help make their community conversations richer. You can see how that works in the example, and on pp7 of their investment policy (which will come up again later).
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The Access Foundation exists to support charities and social enterprises in finding the finance they need to grow their impact. It does this in part by investing and spending a £60m endowment, and where that endowment is invested is how it uses its own bullseye model. In a circular economy move, the centre of Access’s bullseye is to invest its endowment in UK charities and social enterprises (usually the bigger ones) to generate a return to spend on UK charities and social enterprises (usually the smaller ones). Access call this their Total Impact approach: creating the same impact by investing their money as they do when they spend it. You can find out more here.
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Snowball is an impact investment management company that invests money from individuals and organisations, using a bullseye model, at the centre of which is funds “with a track record of high-intensity impact leading to improved outcomes”. Interestingly, the outer two circles of Snowball’s bullseye (there are 5) are descriptions of what we might call ethical and ESG (environment, social and governance) investment… and they have no money in them because Snowball wants to invest in better impact than that.
Here you can find more information about their Impact Intensity approach
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VocTech Trust uses the United Nations Sustainable Development Goals (SDGs) to identify themes most closely related to its mission of vocational technology and skills for work.
Here you can find their latest report about Investing for Impact. Skip to pp12 for a discussion of how they used a bullseye to direct their money at their mission.
A Financial Compass
A financial compass, like this example from BD Giving, is useful for communities to find where their democratic money is pointing. In this case, it’s a tool that is more useful for investing democratic money than spending it. The idea is for each investment to be scored against the four dimensions of impact (which, on this compass is true north), liquidity, risk, and return. Which, to de-code the jargon means, respectively: what will the money create in terms of impact whilst it’s invested; how quickly can we get it back if we need it; what are the chances we’ll lose the money; and how much money will we make on the money we’ve invested?
Like the bullseye, a financial compass helps communities have better conversations about the democratic money they’re in control of.
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Snowball use the points on a financial compass to assess the investments they make on behalf of their community of investors. Snowball explain this as part of their approach on their website here. You might notice that liquidity isn’t mentioned, but that doesn’t mean it isn’t there. Liquidity is ever-present in an impact investment management company like Snowball because investors always want to know when they can get their money back.
An Investment Policy
An investment policy is both a written document and the output of a process. For a community creating democratic money, it captures the conversations, codifies the meaning, sets out the objectives and boundaries of investment, in terms of impact and finances, thinks about risk, and describes how performance will be measured and who is going to do what. In short, it is a community’s record of the journey and the intended destination of democratic money.
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The story of democratic money in Barking and Dagenham is told in BD Giving’s investment policy here. We have also borrowed (with thanks) the cover image to illustrate this part of the toolbox.
You can take a look at the whole investment policy here.
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Access makes a return visit to the toolbox with a couple of similar examples of investment policies, for slightly different chunks of money. They’re both similar to one another simply because they each cover the main headings you might expect to see in an investment policy – like the ones we describe at the top of this toolbox. You can find them here and here.