A recent study by Ethex, the leading Oxford-based positive savings and investment platform, found that over 19.5 million people were either involved or wanted to get involved in positive investing. But, who is the positive investor?
Rachel Mountain, Head of Marketing and Communications of the company, argues that: “Positive investors can be very different and come from all walks of life. They have different values and motivations, and this then impacts how they want to invest their money. However, they all share one overriding philosophy that they want to make their money do good.”
OLIVER*: What motivates younger generations to invest?
RACHEL MOUNTAIN: Both on the Ethex platform and also via Energise Africa (a joint retail impact investing initiative between Ethex and Lendahand) we are increasingly seeing more and more millennial investors getting involved in retail impact investing.
Generally speaking they are a very motivated group who are engaged with a lot of the issues that are impacting the world both socially and environmentally and see how they use their money as a way to create positive change.
One of our Energise Africa investors James Harman gave this reason as to why he’s invested: “It’s a good feeling knowing that you’re helping and you’re getting a potential return on your investment as well. I like the fact that it’s not a handout, it’s helping entrepreneurs and the planet.”
Another Energise Africa investor got involved because, “I wanted to ensure that my money is not funding negligent and damaging activities that historically will be recognised as such. I feel that it is one of my most influential effects on shaping the world around me and can be more powerful than our democratic system in shaping our future.”
In order to keep younger investors engaged it is also important to make sure that positive investments are easily accessible with low minimum thresholds, say £50. In addition, being able to hold investments in an Innovative Finance ISA wrapper is also particularly helpful as this enables investors to benefit from tax free returns.
WHAT IS IMPACT INVESTING?
O*: Retail investors are a great source for driving change through positive investment. Why are they so underestimated? For example, why do traditional financial players not provide investors with products for positive investment?
RM: The whole Positive Investing movement is about democratising money i.e. putting people in control of where, what and how they invest.
The flow of money via traditional financial institutions has typically been opaque and the NGO Bank Track’s website is littered with stories about how following the trail of money, banks have been found to be funding activities that negatively impact both people and the planet.
As a results people want to be sure of where their money is going and often traditional institutions can’t provide this clarity. They want to be able to choose which businesses and organisations they invest with and have a direct connection.
Retail impact investors in large numbers can and are driving real and lasting change and you can see this in Ethex’s recent bond offer with Our Power where investors raised £4.3 million to help them provide much fairer and transparent fuel tariffs to address fuel poverty in the UK.
I think the way people want to invest and how they want to make their money do good is definitely a growing phenomenon that traditional financial institutions have been slow to realise. Their customers needs are evolving and the sector hasn’t kept pace. You can definitely see that with the evolution of Fintech and the growth in Alternative Finance which are both revolutionising how the sector operates.
O*: What is the role of impact investment platforms in supporting the whole ecosystem to grow?
RM: Impact investing platforms have a huge role to play in helping to drive systemic change and you can evidence this with Ethex’s ability to raise over £62 million from more than 13,000 positive investors, helping more than 65 organisations do good in sectors such as renewable energy, social housing, organic food and sustainable transport in just over 5 years.
Impact investing platforms are also driving change when it comes to the UN’s Sustainable Development Goals too. With a UN estimated shortfall in investment of $2.5 billion per year to ensure the SDGs are achieved, retail impact investors can play an important role in bridging the gap.
More specifically in terms of energy access then at current investment levels sub-Saharan Africa will only achieve SDG 7 by 2080 – some 50 years too late! Initiatives like Energise Africa are helping to accelerate progress in this area and retail investors have provided £3.25 million of investment into pioneering solar businesses providing more than 100,000 people with affordable clean energy access.
O*: What are the main challenges in passing from minority pursuit to mass participation?
RM: With 19.5 million people in the UK being interested in positive investing, these are definitely mass participation numbers. The main issues highlighted in our research study is the need to educate people about the choices that they have. You can quite clearly see this with the ISA.
Most people are very familiar with the Cash or Stocks and Shares ISA, but very few people by comparison are aware of the Innovative Finance ISA. The Innovative Finance ISA (IFISA) is essentially the new kid on the block and was launched in 2016 to allow people using Peer to peer (P2P) or lending platforms to utilise the ISA scheme. The scheme was extended to cover other debt-based products such as bonds however, the amount of money being invested via the IF ISA is pretty low when compared to Cash or Stocks and Shares ISAs. The IF ISA has been very helpful in encouraging new types of investors in Energise Africa.
O*: What are your future plans?
RM: It’s pretty simple really – we want to provide accessible savings and investment opportunities that enable every day people to use their money to create social, environmental and financial impact and as a result help lots of organisations and mission driven businesses do good in the world!
Capital is at risk and returns are not guaranteed. Please read the full risk warning on https://www.lendahand.co.uk/risk before deciding to invest.