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Keeping the crowd in crowdfunding as ‘big finance’ arrives



Banks and investment funds are becoming involved in crowdfunding as the sector grows in scale and popularity. Should we welcome the recognition and money this brings? And what must we do to make sure the crowd remains at the centre of crowdfunding?

Crowdfunding has come a long way in a short time. Since it was first used by rock band Marillion in 1997 to aggregate donations from fans to fund a new album and tour, it has evolved into a serious industry at the forefront of financial innovation, offering ordinary people opportunities to directly invest in the real economy.

The number of online crowdfunding and peer-to-peer platforms, and the variety of investment products, has proliferated over the last few years. Depending on your motivations and desired risk profile, you can now lend to established businesses, buy debentures in renewable energy projects, or buy shares in start-ups, to name just a few of the options.

The industry is also becoming regulated around the world, adding to its credibility. In the UK, some platforms like Abundance are already authorised by the Financial Conduct Authority (FCA), and more widespread regulation is planned for 2014.

At the same time, because crowdfunding and peer-to-peer finance have demonstrated their ability to deliver against key political and economic drivers like small businesses finance, they are increasingly being promoted by government. Last year, business secretary Vince Cable announced £100m of government money would be lent to businesses through Funding Circle and Zopa.

Entering the mainstream?

Whilst it’s important to stress such investments are not risk free (Abundance debentures, for example, are long-term investments. You may not get back all of your original capital, and returns are variable), we now know that crowdfunding works, we know it’s popular, and we know it finances useful things. However despite these successes, the amounts raised to date through crowdfunding (£1.7 billion globally in 2012) are small compared to established financial institutions.

So the central question remains whether crowdfunding and peer-to-peer finance can move beyond a niche and break into the mainstream. Or put another way, can they raise nationally significant amounts of investment for our economy in a way which fundamentally differs from the status quo?

This is the context in which a number of big banks and investment funds have recently shown interest in the industry. They bring with them the potential to scale finance up to another level, but also represent challenges to the ethos of that underpins these types of alternative finance.

Enter ‘big finance’

There are a number of ways big financial institutions are teaming up with crowdfunding and peer-to-peer platforms.

One way is to buy stakes in the platforms themselves. This has already happened with the Volantis hedge fund taking a minority stake in FundtheGap. Another is to lend and invest through platforms and benefit from the often competitive returns. Recently it was reported that retail investment fund Exchange Associates plans to raise £200m to do just this. Finally, strategic partnerships are being explored. For example Santander and Funding Circle are considering an arrangement whereby the bank refers businesses to the platform whilst also making a financial contribution.

Threat or opportunity?

Some in the industry have expressed concern about the entry of big finance.

This is principally because the rise of crowdfunding and peer-to-peer finance are frequently understood as a response to the credit crunch and the public disillusionment with big banks that followed the events of 2007-08. According to Stuart Law of peer-to-peer platform Assetz Capital, “independence and a clean break from the greedy banks has been a central pillar of the alternative finance market”. Thus, partnerships such as that proposed between Funding Circle and Santander mean that “we’re in danger of losing all the work that’s been done”, he says.

Another concern is that the intrinsically democratic character of the industry could be undermined. If the primary focus were to become funnelling large amounts of bank and investment fund capital, the direct link between individuals and what their money does on their behalf would be lost. This could be exacerbated if platforms in turn had less incentive to maximise participation from the widest possible range of people.

Keeping the crowd in crowdfunding

The problem with these perspectives however, is that they arguably fail to envisage the opportunity to significantly increase the amount of money flowing through crowdfunding and peer-to-peer platforms whilst retaining the radical and socially-beneficial characteristics of the industry.

To be clear, such an outcome cannot and should not be taken for granted. Vigilance will be needed so that big finance enters the industry in a spirit of genuine partnership that complements rather than overwhelms the values that make crowdfunding and peer-to-peer finance so appealing.

Above all else, mass participation must not become a soundbite objective of only secondary importance, and a level playing field must be maintained between ordinary retail investors and bigger players. These core principals must remain central to industry growth and the business decisions of crowdfunding platforms.

This may be more challenging for certain types of platform than others. For example, some peer-to-peer lending sites are auction based, raising finance via bids made by investors starting with the lowest. If a large amount of money entered this process in one go then rates of return for other small investors could be depressed. However other types of platform which offer fixed price investment opportunities do not suffer this problem.

Equally important is the transparency which defines the sector on issues of risk, fees and returns. This must be retained, and the unequal access to information and barriers to participation that characterise the public markets and favour large investors must be avoided.

But providing such issues are addressed, the entry of big finance could not only provide extra capital but even serve to boost mass participation. The fact that ‘mainstream’ investors are becoming active participants in the sector is a very public vote of confidence – a signal that alternative finance is an asset class which has become well established and provides attractive and often higher returns than the stock markets but with lower risk and volatility.

So big finance could have a role to play in moving crowdfunding into the mainstream, but the crowd must remain centre stage.

Sam Friggens is a writer for renewable energy funding platform Abundance Generation. You can follow him on Twitter: @Sam_Friggens. This article originally appeared on Abundance’s blog.

Further reading:

Why investors should consider community-owned renewables

FCA sets sights on crowdfunding regulation

Capitalism 2.0 in the advent of the growing income gap

Abundance Generation: crowdfunding the future of energy

The wisdom (and cash) of crowds: an introduction to crowdfunding

Sam Friggens is a writer for renewable energy funding platform Abundance Generation. You can follow him on Twitter: @Sam_Friggens.


New Zealand to Switch to Fully Renewable Energy by 2035



renewable energy policy
Shutterstock Licensed Photo - By Eviart /

New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.

New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.

Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.

Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”

The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.

Zero net emissions by 2050

Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.

Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.

She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.

Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”

A worldwide shift to renewable energy

Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.

Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.

Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.

Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.


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How Going Green Can Save A Company Money



going green can save company money
Shutterstock Licensed Photot - By GOLFX

What is going green?

Going green means to live life in a way that is environmentally friendly for an entire population. It is the conservation of energy, water, and air. Going green means using products and resources that will not contaminate or pollute the air. It means being educated and well informed about the surroundings, and how to best protect them. It means recycling products that may not be biodegradable. Companies, as well as people, that adhere to going green can help to ensure a safer life for humanity.

The first step in going green

There are actually no step by step instructions for going green. The only requirement needed is making the decision to become environmentally conscious. It takes a caring attitude, and a willingness to make the change. It has been found that companies have improved their profit margins by going green. They have saved money on many of the frivolous things they they thought were a necessity. Besides saving money, companies are operating more efficiently than before going green. Companies have become aware of their ecological responsibility by pursuing the knowledge needed to make decisions that would change lifestyles and help sustain the earth’s natural resources for present and future generations.

Making needed changes within the company

After making the decision to go green, there are several things that can be changed in the workplace. A good place to start would be conserving energy used by electrical appliances. First, turning off the computer will save over the long run. Just letting it sleep still uses energy overnight. Turn off all other appliances like coffee maker, or anything that plugs in. Pull the socket from the outlet to stop unnecessary energy loss. Appliances continue to use electricity although they are switched off, and not unplugged. Get in the habit of turning off the lights whenever you leave a room. Change to fluorescent light bulbs, and lighting throughout the building. Have any leaks sealed on the premises to avoid the escape of heat or air.

Reducing the common paper waste

paper waste

Shutterstock Licensed Photo – By Yury Zap

Modern technologies and state of the art equipment, and tools have almost eliminated the use of paper in the office. Instead of sending out newsletters, brochures, written memos and reminders, you can now do all of these and more by technology while saving on the use of paper. Send out digital documents and emails to communicate with staff and other employees. By using this virtual bookkeeping technique, you will save a bundle on paper. When it is necessary to use paper for printing purposes or other services, choose the already recycled paper. It is smartly labeled and easy to find in any office supply store. It is called the Post Consumer Waste paper, or PCW paper. This will show that your company is dedicated to the preservation of natural resources. By using PCW paper, everyone helps to save the trees which provides and emits many important nutrients into the atmosphere.

Make money by spreading the word

Companies realize that consumers like to buy, or invest in whatever the latest trend may be. They also cater to companies that are doing great things for the quality of life of all people. People want to know that the companies that they cater to are doing their part for the environment and ecology. By going green, you can tell consumers of your experiences with helping them and communities be eco-friendly. This is a sound public relations technique to bring revenue to your brand. Boost the impact that your company makes on the environment. Go green, save and make money while essentially preserving what is normally taken for granted. The benefits of having a green company are enormous for consumers as well as the companies that engage in the process.

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