At Living Cities, we consistently look for ways to use the range of our capital resources to transform the lives of low-income people in the cities where they live. Over the course of the last year, the Green Economy Working Group of Living Cities actively explored ways to integrate grants and debt deployment into a cohesive strategy in order to do just that.
In the past, we made little distinction between the types of capital resources we had available. ‘Capital’ was used broadly to include traditional grants, recoverable grants, equity, and debt. In reality, they were each deployed using different hypothesis for impact, different approval processes, and radically different time horizons. Each of these resources plays a special role in allowing us to test the best system-level solutions we are seeking to impact. As a result of our initial approach grants were made and debt deployed more opportunistically than strategically. Limited coordination between program and capital staff reinforced the pattern, since both perspectives need to be present in order to best deploy funding strategically.
To begin this experiment of integrating program and capital perspectives, we initiated meetings and discussions with a clear distinction between grants and debt, as well as with an explicit intention to align both strategically. We started translating the individual grant and debt hypotheses, time horizons, and processes so that we had a common understanding of the continuum of capital within Living Cities.
We also engaged our members by introducing preliminary integration models that varied between no integration to complete coordination: the portfolio, parallel, and double helix approaches, respectively:
Double helix: Grants & debt deployment tightly integrated.
Parallel: Grants & debt to different organizations in similar areas of work.
Portfolio: No debt, just grants portfolio
Throughout this process, both program and capital staff worked closely through the management of the Green Economy Working Group.
The following discussions highlighted some important lessons:
First, Working Group members actively engaged the preliminary integration models . While grant and debt strategies do not typically intersect, the field is indeed interested in breaking down the silos of program and capital perspectives.
Second, there is no single sequential order of grants and debt . While grants sometimes lead to debt, the converse is also possible. In reality, there are several different possible types of coordination possible between both funding sources.
Third, the typology of grants and debt is in itself limiting . Different kinds of grants exist, and debt can be deployed for a wide array of purposes. We need a better understanding of the different implications and potential uses of each.
In the coming round, we see greater opportunities to break down our own initial debt and grant integration models. Living Cities will continue to explore the number of different ways grants and debt can interact and work together to advance our mission of improving the lives of low-income people and the cities they live in.