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The Covid-19 pandemic has revealed many shared and related international problems in our hyper-connected world.
But one deadly concern it has uncovered has been our inability to protect our oldest and most vulnerable citizens living in various residential care systems. At the height of the first wave of Covid-19, WHO Europe reported that up to 50% of related deaths were in care homes. Numbers in the US and Canada were reported to be significantly higher still.
The problem is complex and diverse, but despite the best efforts of owners, management and staff to provide quality and cost effective care, the ability of care home management to deal with the impact of Covid-19 was a major factor contributing to the mortality rate.
In reality though the problem is longstanding and goes deeper. Many care systems for older people have been troubled for decades; the care is complex to provide – hence expensive – and the quality provided is a factor of the type and level of financing available (public or private).
It’s a problem that affects us all. Most people living in high and middle income countries will have relatives who are in care homes, or have themselves have faced the increasingly difficult choice of how to pay for good quality care for their older loved ones.
Unless something changes we will all face the same care conundrum as we age.
Alongside a couple of equally concerned investment/health professionals that will be known to many readers of Responsible Investor, we’ve decided to try and help do something about the problem.
RI has been working with Sally Bridgeland, FIA, trustee, non-executive director and adviser and Dr Rachel Melsom, MBBS, BSc. Director, Medical Matrix Consulting, and practicing Physician with a special interest in Elderly Care), giving our time voluntarily and the resources of Responsible Investor to a competition that will launch on January 18, titled: Silver linings: Because our pension beneficiaries really do matter. A think > do competition for ‘brainwaves’ and ‘business plans’ to make elderly care sustainable.
We believe the competition can help develop solutions that bring together and harness the best in technology, architecture, finance, health and care provision enabling financially, socially and environmentally sustainable and accessible elderly care; ultimately improving quality of life and wellbeing.
But more of that on Monday January 18. In the meantime, take a look at our Silver Linings LinkedIn page and sign up.
In this piece, I wanted to explain why we are doing it.
Having worked most of our careers in the world of pensions, investment and sustainability, good, long-term social care is a problem that, to us, looms large like a menacing shadow, but which is out there to the side of many of the usual daily ESG concerns.
And yet it is really at the heart of everything we do: our pension savings systems are designed (at their best) to provide financing for a healthy and comfortable period of older age, including any required and associated care.
But that retirement income – if indeed, it is sufficient – is quickly eaten up by the cost and availability of care that can be provided in a system where the sums increasingly don’t add up between what the state covers, and what individuals themselves must pay based on their means.
We apologise for the UK examples, but it’s the easiest market for us to present coherent data in. However, we know from experience that this is an international problem, albeit with variations in quality/expenditure and social priority.
In the UK, it is estimated that the average cost for residential self-funded elderly care back in 2016 was £846 per week (nearly £44,000 per year). UK local authorities on average paid £621 per week for the same services on behalf of residents who were unable to fund themselves.
The fees for private elderly care exceed pensions (and regularly dwarf average asset disposals): the ‘average’ private pension pot is estimated to be in the region of £65k, albeit with significant dispersion across regions. Even the maximum pension from the UK’s “lifetime allowance” won't be enough to pay average self-funded fees.
The UK’s Care Quality Commission says the elderly care sector already faces serious sustainability challenges due to the low fee rates being paid for state-funded residents against increased cost pressures, due, in part, to increasing wage costs, but also rises in planning/build and care oversight costs.
And the problem is getting worse in an ageing society with ever greater care needs.
In the UK, the Office for National Statistics predicts a 36% growth in persons aged 85+ between 2015 and 2025, from 1.5 million to 2 million, and as age profiles trend upwards, we have more elderly people, many needing greater levels of support.
The Nuffield Trust estimates that by 2038, around one in every four people will be aged 65 and over.
This will lead to a substantial increase in demand for care and care home services. The story is the same in most countries.
Yet Nuffield finds that care home bed numbers per 100 people aged 75 and over declined between 2012 and 2019 from 11.3 to 9.8 – a 13% decrease.
Numerous studies show similar data, particularly in recent years, although some of this is offset by increased numbers of the elderly staying at home, an inevitable trend which seems set to continue, particularly as local authority budgets get squeezed.
The general consensus is that many elderly prefer to remain independent and be at home and generally fare better in their own homes with carers visiting, rather than in care homes.
But, it is perhaps no surprise that the market in private care home provision skews to where the highest potential profit lies. Lower and medium income households, already less able to juggle work and care from home, will find that the new normal for old age is bleak.
These two charts say it all in a UK context:
A lot of good research has been done into where the problems of elderly social and residential care lie, and where potential solutions could reside.
But they often falter when it comes to explaining how the financing will happen; too patchy from budget constrained governments, too flighty and short-termist from finance, as this recent piece in the Financial Times explains.
The problem, as we see it, is to find “a way to finance care for our elderly which is genuinely sustainable and inclusive”.
Investors require sufficient certainty about future revenues, and trusted partnership with government and local authorities is paramount.
Our pension funds need direct capital returns, uncorrelated where possible, above current bond rates, and potentially benefiting from government support for long-term financing.
We believe that there is potentially a better public/private model here that would improve innovation and standards. Direct/indirect pension fund financing here makes a lot of sense: beneficiaries money going towards beneficiary-related solutions.
As mentioned earlier, good pension systems seek good retirement outcomes in their broadest sense, and so we believe that pension funds have a responsibility to be more involved in the quality of elderly care.
And the finance world, when it turns its collective minds towards smart societal, financial and sustainable solutions can, and arguably should be, a force for viable progress towards a new normal beyond current old style elderly care homes.
As we mentioned at the start of the piece, this is a complex problem, with many moving parts across a variety of social care, healthcare, building and finance disciplines.
So what’s a ‘think > do’ competition? It’s a competition where we ask you to ‘think’ about solutions to win prizes, and then we will work with the finance industry via a digital competition ‘winners’ presentation event to see what we can ‘do’ about taking the ideas to investable potential. We don’t want this to just be another competition for the sake of it.
We also don’t want the competition to be purely the domain of professionals. Therefore, we are splitting the competition into two types of entry:
1. Brainwaves that highlight a key problem and provide an inspired solution in an older age care context. This part of the competition will be open to the general public, simple to enter, and will form part of our broad social media outreach.
Brainwaves: £500 each for the 8 best brainwaves
2. Business Plans that could develop into real investable solutions that address the problem of unsustainable care for older people. We anticipate these plans to incorporate novel features and associated benefits. These plans can reach across one or multiple areas – e.g. residential provision, technical innovation, financial planning, multi-generational living, home living, etc.
Business Plans: £10,000 to the winning entry, and £5,000 to 2x runner-up entries.
The aim of the competition is for specific inter-disciplinary solutions and investable ideas for how we can improve the way we use the built environment and/or technology and/or the community and the expertise of health professionals via new financial or re-imagined financial structures/products/solutions to start solving the problem above, and start contributing to some of the other sustainability challenges we face.
What if older age care homes could be of the highest calibre of social and environmental design and build? What if these structures enabled community and health professionals to be integrated more effectively into community and village settings?
What if investors could clearly contribute with assets to SDG 1: No poverty, SDG 3: Good health and well-being, SDG 9: Industry, innovation and infrastructure, and SDG 10: Reduced inequalities and SDG 17 – partnerships.
Rhetorical questions are of little help though without thought, plans, proposals and action for change.
How could institutional investors take action to make the hopeful Covid-19 slogan of sustainable finance advocates to ‘Build Back Better’ be truly meaningful and aimed squarely at meeting existing genuine social/retirement needs of individuals with, in addition, clear environmental benefits?
We believe the competition for ideas from institutional investors and market actors on how this could be achieved is part of that.
On Monday January 18, 2021 we will launch the Silver Linings Competition and outline why we think this competition could be helpful based on our experience of past competitions, and then demonstrate how it will work. Our aim is to solicit both blue skies and pragmatic thinking – through the lens of ‘solutions’ and ‘financing’- and then to bring together investors to discuss those ideas.
We think this is part of our responsibility to help improve old age care, to build back better, and support the SDGs through sustainable financial thinking and capital allocation.
We hope you’ll help support us do that!
We are looking for sponsors.
Contact firstname.lastname@example.org for more information on Sponsor Benefits.
Submission of Business Plans:
By January 9, 2022
Short list Business Plans announced:
January 27, 2022
Business Plan winners announced:
February 10, 2022