Humanising investment: how the tides are turning on Towns Fund finance

Wayne Butcher

Wayne Butcher, real estate and assets lead at major financial services firm Grant Thornton, has seen much change in investment priorities in the last 16 years. He works on large investments that make a difference to people’s lives and lead to tangible outcomes – particularly for local government where his financial work translates to real-world products.

Wayne talks us through the changes he’s seeing and what this all means for Towns.

Measuring Environmental & Social Value

The core theme of my work is identifying, creating, capturing, and preserving value within the public sector. Four or five years ago, investors were looking at value on a spreadsheet. Now, ESG (environmental, social and governance) factors are increasingly at the heart of investors’ priorities.  

Investment is about so much more than getting money out the door; it’s a broader social value vision and human story. Investors want to see how investments fit into the big picture of a changing society where values and brand identity matter. The redevelopment of Headingly Cricket Ground with Leeds City Council shows this. There, the Leader of the organisation didn’t just ask for money but showed investors how the project would help breathe new life into the surrounding areas and wanted investors who could buy into the desired vision.

Investors are now asking these questions about projects. This is a shift from rigid guidance and decisions being made from spreadsheet outputs or benefit-cost-ratios (BCRs); subjective decisions present a challenge when previously projects were measured solely in pounds and pence. Whilst viability still remains important, projects are now being quantified through the number of jobs they create and how the most deprived in society will benefit. A sense of humanity and investing in people is more important than ever.

Making investment understandable

People on the ground want to know what projects mean for them – whether that’s 3,000 new jobs, 500 affordable houses or new training and upskilling opportunities. It’s not neat for economists or accountants such as myself, but it’s not just the public that wants to humanise investments, it’s investors too. Investors want a compelling narrative; it’s not a question of Grimsby vs. Middlesborough, but instead, why should the investor put capital into Grimsby in the United Kingdom in the first place. Why not Hanoi, San Juan or Helsinki? Many investors play on the international stage, so competition is stiff.

The ‘soft fluffy stuff’ that for so long was neglected is now in the mainstream and this can only be a good thing as investors have a huge wealth of experience to draw from in supporting the public sector to deliver its ambitions.

Trust and Transparency

The key to building relationships is trust. Investments are no longer simple transactions between A & B. Levelling Up is more than market forces and it’s important to build relationships that allow room for compromise throughout this complex process. Towns should always be honest and show ‘warts and all’ to investors. Vulnerability is important; there is no point in hiding a skeleton for it to come out later. If there is a question that needs to be asked, ask it.

Post-COVID, investors are looking for a human side and want to see the whites of your eyes. Investors like direct and straightforward answers to see if there is a chance of working together. I worked on a project in Glasgow with some real financial challenges, but having the honest, challenging conversations early paid off in the long term – so much so that the partnership is still going today.  Investors will buy into a challenge if they can square the circle and make the finances work, especially if you have a compelling narrative and have already built trust.

What can partners bring to the table?

A lot of the towns we work with simply don’t know what investors are out there. We work with Towns to bolster their showcasing abilities. More than ever, investors want to back the public sector - it’s seen as a safe place for financial investment. A huge range of investors are looking at this space – institutional investors, pension funds, high street banks and sovereign wealth funds trust local government, so shop around. It’s important to find the right partner for your Town to deliver your unique vision.

Celebrating your achievements

There is often a confidence gap when it comes to asking for money. But take pride in your project! Remember all the hard work you have put in alongside your team. If you believe in your project’s full potential, investors will too. Networking is also vital. Events such as MIPIM and the UK Real Estate Forum are a great way to meet investors and sell your Towns. 

As an example, Stoke-on-Trent, held an investor day hosted at our offices maximising their chance to present to a larger, captive audience. Small changes help reach many people in one go, rather than through piecemeal conversations. They’ve seen a revitalisation to become known as ‘Silicon Stoke’ which in part has been down to strong leadership and belief in your place. The leader of the council worked closely with local authority officers to deliver a presentation that was passionate, persuasive and complete on the finer details that are so important to investors.

A figurehead, mayor, council leader or Towns Fund Board Chair is useful to make investors and the public sit up and take notice, but the people working to get the fine-print right are just as important – so work cross-discipline to build your pitch and make the best of the skills that your team possesses.

What’s reasonable?

Clients often ask this. The answer is dependent on the investor! There is no point in asking for £10,000 from a pension or sovereign wealth fund that is looking to invest much larger sums. You need to do your homework on investors and understand their values and strategic aims.

None of this is independent of geopolitical events or external factors. Grant Thornton works not only on storytelling and building knowledge but also educating and de-risking projects from factors outside our control. This can be done through risk mitigation work, building in contingencies, having scope for value engineering and most importantly, building relationships to give space to pivot.

To conclude, my five top tips as investment becomes more human are:

1. Showcase your social and environmental credentials: The values behind your story matter now more than ever.

2. Always go for a ‘no-surprise’ approach: Be transparent and honest from early in the process.

3. People buy from people: Less quantifiable measures are of increasing importance. Bring investments to life.

4. Showcase what you have and be confident in your product: Investors want to help but can only do so if you get out there. A one-to-many approach can help you streamline your efforts.

5. Find the right investor for you and ask questions: Investment is a two-way street – there needs to be a natural fit.

If you have any further questions on the work I or Grant Thornton do, please contact me through townsfund@arup.com. We’ll be happy to help.