For a growing number of investors, the idea of putting cash into green infrastructure projects across Britain is a strong one.
Whether it is a tomato farm in Suffolk or an energy project in the Forest of Dean, the thought of money being put to green use while also earning interest is undoubtedly appealing.
One investment firm is looking to capitalise on the growing popularity of crowdfunding, as well as environmental concerns, among retail investors and give them an opportunity to invest in companies making an impact.
Bruce Davis and Karl Harder launched Abundance Investments in 2012 after a coffee in the British Library.
Abundance Investments gives everyday investors the opportunity to invest in green projects
The marriage of Bruce’s work on the democratisation of finance with peer-to-peer firm Zopa, and Karl, who was in the middle of an MBA and looking at green finance, culminated in what is now Abundance.
Here, as part of our new B Corp Beat series – focusing the spotlight on ‘green’ British companies – we find out more…
From wind turbines to tomato farms…
Bruce and Karl – and later joined by Louise Wilson – cottoned onto the importance of green finance well before the term Environmental, Social and Governance (ESG) became a buzzword among corporates.
What is a B Corp?
In our new B Corp Beat series, we are interviewing British businesses which meet these strict standards.
They are described as businesses that are said to meet the ‘highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.’
One the website, it says: ‘B Corp Certification doesn’t just evaluate a product or service; it assesses the overall positive impact of the company that stands behind it. And increasingly that’s what people care most about.’
B Corp was started in 2006 and gives scores to companies in order for them to be verified.
These five areas are: governance, workers, community, environment and customers.
The Financial Conduct Authority regulated firm launched in 2012 to offer everyday savers the opportunity to invest in eco-projects that have usually been the preserve of institutional investors.
Its first investment was to fund the construction of a community-sized wind turbine in the Forest of Dean, one of the largest investments of its kind at the time.
Since then it has invested £116.2million through 48 projects and paid £36.3million in returns since its launch.
Environmental concerns have climbed up the agenda for a small investor and Abundance is proving to be the gateway for savers to invest in physical projects.
It has offered a range of different projects up to £8million, from renewable energy projects to, most recently, a strawberry farm.
But Abundance is still relatively small scale and does not have the capacity to launch multiple projects at a time, which means investors have little choice still through the platform.
‘The pandemic did slow down the rate that our pipeline was operating at – the number of projects we’ve had to invest in is longer as a result,’ Bruce concedes.
‘The main way people find out about Abundance is when we have something new to invest in.’
However, the firm says it continues to see strong demand and it is starting to see a wave of new, younger investors come through.
The path to net zero: tomato farms and council bonds
The projects are central to what Abundance offers but for Bruce it is about much more: the UK’s transition to net zero.
‘We want our customers to benefit financially from that, obviously, but if it’s not achieving that purpose then the financial returns are largely irrelevant in our view. There’s a greater cost to inaction on the climate emergency’.
The UK has set itself a target of a 68 per cent reduction of emissions by 2030, 78 per cent by 2035 and a goal for net-zero emissions by 2050.
‘2050 is all very well but I always feel like that’s far enough away that people think it’s not that urgent,’ Bruce says.
It is something echoed by the Government’s own COP26 spokesperson in recent weeks.
Where Abundance has been ahead of the curve in terms of investing in infrastructure projects, it is now turning its attention to food and agriculture.
‘Food is the second biggest problem we have in terms of carbon – not necessarily the focus on the food you choose in a supermarket or the packaging, but the agriculture,’ Bruce says.
‘At the moment we don’t count the production of food overseas within what we consider to be net zero. We count the consumption – getting it from the harbour to supermarket – but don’t count production in say Egypt or Morocco. If we did, it would increase significantly.’
Investors have shown strong demand for this new sector – its investment in a strawberry firm sold out within a week.
Now it is looking to raise £6.75million for Sterling Suffolk, a company using glasshouse technology to grow tomatoes.
The 11-year investment offers a fixed 8 per cent rate of a return, which Abundance says is competitive with rates offered by banks and specialist lenders. On £5,000 invested, this would equate to £2,777.67 interest.
The rate of return is in the mid-range of risk for investments on its platform – from 1.2 per cent for its council bonds to high risk corporate bonds or construction projects which offer a return of between 12 and 15 per cent.
‘Sterling Suffolk is an established company with existing revenues and track record but returns are not guaranteed and if Sterling Suffolk performs less well than expected you may receive a lower return or even loss of your original investment,’ Abundance says.
Money is held in a segregated Lloyds Bank client account. On its website, it says that it is part of the Financial Services Compensation Scheme – under this scheme, investors can claim up to £85,000 in compensation if it goes out of business.
Louise, Bruce and Karl launched Abundance in 2012 and became a B Corp in 2018
Elsewhere, investors also have the opportunity to invest in councils across the country who are delivering green and social projects.
It is a UK first and allows people to invest directly into councils with a lower risk return. It’s 5-year green bonds with West Berkshire and Warrington both offered a fixed 1.2 per cent rate of return.
Abundance launched its first Community Municipal Investment (CMI) in July 2020 and already over 800 investors have invested £2million with two councils.
The funding has been put towards solar panels on council buildings and more EV charging points throughout West Berkshire. Warrington is aiming to become the UK’s first carbon neutral town and is investing in a new solar farm.
Bruce says there are five more in the pipeline and is in conversations with a quarter of all councils in the UK.
B Corp certification an ‘extension of our purpose’
It took the Abundance team six months to be certified as a B Corp.
Prospective companies have to go through rigorous assessments and the certification is awarded to organisation who achieve as core of at least 80 out of 200 against five areas of impact: governance, community, workers, environment and customers.
Abundance made some changes: it now buys its office electricity from a renewable supplier and buys cleaning products, soap and paper from ethical suppliers.
Such small changes perhaps indicate becoming a B Corp was a natural step for the team.
‘We’d always taken the view that we were a business that fitted the B Corp philosophy rather than having to transform our business into a B Corp,’ Bruce says.
‘You can be quite blasé about your footprint when you’re building wind turbines and solar parts so we had a look at what we were doing with our employees and governance.’
But it is still hard not to think a lot of companies view the B Corp process as a box ticking exercise. Bruce is adamant this is not the case for Abundance: ‘It was a good extension of our purpose.’
‘When you’re a startup company and you’re trying to grow, you don’t always have the processes you need in place particularly around employees so it did make us think about that.’
‘It’s easy when you’re a fast growing business to react to problems rather than think about the strategy. It stops you being complacent.’
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