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New research Shows UK Online Alternative Finance Market Grows to £3.2 Billion in 2015

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In 2015 the UK online alternative finance sector grew 84%, facilitating £3.2 billion in investments, loans and donations, according to a joint report published today by the Cambridge Centre for Alternative Finance at the University of Cambridge and UK innovation foundation Nesta, in partnership with KPMG and with the support of CME Group Foundation.

This is a significant increase in volume, but growth of the online alternative finance market is slowing down, with the annual growth in 2014/2015 being nearly half the 161% growth from 2013/14. “Although the absolute year-on-year growth rate is slowing down,” the report said, “the alternative finance industry still recorded substantive expansion across almost all models.”

The report also highlights the rapid expansion of donations-based crowdfunding, the perceived risk of fraud and malpractice by the industry, and increasing institutionalisation – as around a quarter of P2P (peer-to-peer) loans are now funded by institutional investors, including traditional banks and government through organisations such as the British Business Bank.

Pushing Boundaries – 2015 UK Alternative Finance is the latest in an annual series of reports from the University of Cambridge Judge Business and Nesta, which track the size and development of online alternative finance, such as P2P lending and crowdfunding, in the UK.

Key findings of Pushing Boundaries, a survey of 94 crowdfunding and P2P lending platforms, include:

Increased share of the market for business finance: in 2015 it is estimated that online alternative finance platforms provided the equivalent of over 3% of all lending to SMEs (small and medium-sized enterprises) in the UK. For small businesses – those with a turnover of less than £1 million a year – P2P platforms provided an amount lending equivalent of 13% of all new bank loans.

Institutionalisation is taking off: 2015 saw increased involvement from institutional investors in the online alternative finance market. The report shows that 32% of loans in P2P consumer lending and 26% of P2P business lending were funded by institutional investors.

Donation-based crowdfunding is the fastest growing model: although starting from a relatively small base (£2 million), donation-based crowdfunding is the fastest growing model in the 2015 study, up by 500% to £12 million.

Real estate is the single most popular sector: in 2014/2015 the most popular sector for online alternative finance investments and loans was real estate, with the combined debt and equity-based funding for this sector reaching £700m in 2015.

The equity market is growing fast: the second fastest growing area of the alternative finance market is equity-based crowdfunding, up by 295% – from £84 million raised in 2014, to £332m in 2015. Excluding real estate crowdfunding, in 2014/2015 the equity-based crowdfunding sector contributed to £245 million worth of venture financing in 2015 – equivalent to over 15% of total UK seed and venture equity investment.

The industry is generally satisfied with current regulation: when asked what they thought of existing regulation, more than 90% of P2P lending and equity-based crowdfunding platforms stated that they thought the current level was appropriate.

The biggest risk to market growth is fraud or malpractice: when asked what they saw as the biggest risk to the future growth of the market, 57% of P2P lending and equity-based crowdfunding platforms cited the potential collapse of one or more of the well-known industry player due to fraud or malpractice.

Warren Mead, Global co-lead of Fintech at KPMG, said:“After years of pushing boundaries, 2016 will be the year where ‘alternative’ financial options finally join the ranks of the mainstream. From the recognition of regulators, to industry pioneers being bestowed with New Year’s Honours: it’s clear the market has come of age as an integral part of the lending landscape.”

“But while this evolution gives the industry the platform to grow, it also brings its own set of challenges. Being part of the financial establishment doesn’t sit well with its original social purpose. Incumbents are also playing catch up with their own digital investment, and are closing in on the disrupters’ lead. Meanwhile, platform failures within these growing networks are inevitable. So the question is, will the hard won enthusiasm for these platforms start to wane?”

Robert Wardrop, Executive Director of Cambridge Centre for Alternative Finance said: “The substantive growth of alternative finance in the UK last year is not surprising, given that these new channels of finance are increasingly moving mainstream. One of the key drivers underpinning this development is the growing institutionalisation of the sector. The Cambridge Centre for Alternative Finance is proud to shed light on this fascinating and dynamic industry, to help inform policymakers, regulators and the general public about how these areas of finance are increasingly becoming part of our everyday economic life.”

Stian Westlake, Nesta’s Executive Director of Policy & Research said: “2015 has seen another year of remarkable growth for Alternative Finance in the UK. Little more than a collection of plucky startups just six years ago, the sector now does £3.2 billion of business a year.  As the sector grows and matures it is sure to face challenges – investors will be keen to see returns, and another financial crisis would certainly test the robustness of P2P lending. But, as Nesta’s continuing research into the industry has found, the ability of platforms to harness the power of the crowd to connect savers, borrowers and businesses has been powerful. We look forward to seeing how the sector advances and changes again in the year ahead.”

Jim Oliff, Chairman of CME Group Foundation, said : “Today’s research offers a detailed snapshot of how the emerging alternative finance sector in the U.K is driving growth and creating opportunities for business and individuals alike. The Foundation has a long track record of supporting cutting edge research initiatives relevant to the financial industry which uncover and promote future trends to help move the sector forward.”

The report was led by Bryan Zhang, a Director of Cambridge Centre for Alternative Finance, and Peter Baeck, Principal Researcher at Nesta. It has been supported in part by funding from audit, tax and advisory service KPMG and CME Group Foundation, the foundation affiliated with CME Group, the world’s leading and most diverse derivatives marketplace.

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Energy

What Should We Make of The Clean Growth Strategy?

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Clean Growth Strategy for green energy
Shutterstock Licensed Photo - By sdecoret | https://www.shutterstock.com/g/sdecoret

It was hardly surprising the Clean Growth Strategy (CGS) was much anticipated by industry and environmentalists. After all, its publication was pushed back a couple of times. But with the document now in the public domain, and the Government having run a consultation on its content, what ultimately should we make of what’s perhaps one of the most important publications to come out of the Department for Business, Energy and the Industrial Strategy (BEIS) in the past 12 months?

The starting point, inevitably, is to decide what the document is and isn’t. It is, certainly, a lengthy and considered direction-setter – not just for the Government, but for business and industry, and indeed for consumers. While much of the content was favourably received in terms of highlighting ways to ensure clean growth, critics – not unjustifiably – suggested it was long on pages but short on detailed and finite policy commitments, accompanied by clear timeframes for action.

A Strategy, Instead of a Plan

But should we really be surprised? The answer, in all honesty, is probably not really. BEIS ministers had made no secret of the fact they would be publishing a ‘strategy’ as opposed to a ‘plan,’ and that gave every indication the CGS would set a direction of travel and be largely aspirational. The Government had consulted on its content, and will likely respond to the consultation during the course of 2018. And that’s when we might see more defined policy commitments and timeframes from action.

The second criticism one might level at the CGS is that indicated the use of ‘flexibilities’ to achieve targets set in the carbon budgets – essentially using past results to offset more recent failings to keep pace with emissions targets. Claire Perry has since appeared in front of the BEIS Select Committee and insisted she would be personally disappointed if the UK used flexibilities to fill the shortfall in meeting the fourth and fifth carbon budgets, but this is difficult ground for the Government. The Committee on Climate Change was critical of the proposed use of efficiencies, which would somewhat undermine ministers’ good intentions and commitment to clean growth – particularly set against November’s Budget, in which the Chancellor maintained the current carbon price floor (potentially giving a reprieve to coal) and introduced tax changes favourable to North Sea oil producers.

A 12 Month Green Energy Initiative with Real Teeth

But, there is much to appreciate and commend about the CGS. It fits into a 12-month narrative for BEIS ministers, in which they have clearly shown a commitment to clean growth, improving energy efficiency and cutting carbon emissions. Those 12 months have seen the launch of the Industrial Strategy – firstly in Green Paper form, which led to the launch of the Faraday Challenge, and then a White Paper in which clean growth was considered a ‘grand challenge’ for government. Throughout these publications – and indeed again with the CGS – the Government has shown itself to be an advocate of smart systems and demand response, including the development of battery technology.

Electrical Storage Development at Center of Broader Green Energy Push

While the Faraday Challenge is primarily focused on the development of batteries to support the proliferation of electric vehicles (which will support cuts to carbon emissions), it will also drive down technology costs, supporting the deployment of small and utility-scale storage that will fully harness the capability of renewables. Solar and wind made record contributions to UK electricity generation in 2017, and the development of storage capacity will help both reduce consumer costs and support decarbonisation.

The other thing the CGS showed us it that the Government is happy to be a disrupter in the energy market. The headline from the publication was the plans for legislation to empower Ofgem to cap the costs of Standard Variable Tariffs. This had been an aspiration of ministers for months, and there’s little doubt that driving down costs for consumers will be a trend within BEIS policy throughout 2018.

But the Government also seems happy to support disruption in the renewables market, as evidenced by the commitment (in the CGS) to more than half a billion pounds of investment in Pot 2 of Contracts for Difference (CfDs) – where the focus will be on emerging rather than established technologies.

This inevitably prompted ire from some within the industry, particularly proponents of solar, which is making an increasing contribution to the UK’s energy mix. But, again, we shouldn’t really be surprised. Since the subsidy cuts of 2015, ministers have given no indication or cause to think there will be public money afforded to solar development. Including solar within the CfD auction would have been a seismic shift in policy. And while ministers’ insistence in subsidy-free solar as the way forward has been shown to be based on a single project, we should expect that as costs continue to be driven down and solar makes record contributions to electricity generation, investment will follow – and there will ultimately be more subsidy-free solar farms, albeit perhaps not in 2018.

Meanwhile, by promoting emerging technologies like remote island wind, the Government appears to be favouring diversification and that it has a range of resources available to meet consumer demand. Perhaps more prescient than the decision to exclude established renewables from the CfD auction is the subsequent confirmation in the budget that Pot 2 of CfDs will be the last commitment of public money to renewable energy before 2025.

In short, we should view the CGS as a step in the right direction, albeit one the Government should be elaborating on in its consultation response. Its publication, coupled with the advancement this year of the Industrial Strategy indicates ministers are committed to the clean growth agenda. The question is now how the aspirations set out in the CGS – including the development of demand response capacity for the grid, and improving the energy efficiency of commercial and residential premises – will be realised.

It’s a step in the right direction. But, inevitably, there’s much more work to do.

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Energy

4 Energy Efficient Home Upgrades that You Can Install Yourself

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The wide range of energy efficient products is growing rapidly every day. Nearly every appliance in your home can be upgraded to be more energy efficient, which oftentimes is not only helpful in lowering your carbon footprint but also in lowering your monthly bills.

However, the upfront costs of installing green appliances can sometimes be fairly steep. In order to lessen some of the cost, try installing energy efficient upgrades yourself rather than hiring a professional. While it is smart to hire a professional in some cases, try installing the following four upgrades yourself and make your home even more energy efficient at a fraction of the price.

Insulate Your Water Heater

If you own a home, you have most likely thought about making sure your walls and roof are insulated. You don’t want your hard earned money escaping due to a lack of insulation. However, if you are like most people you haven’t given a second thought to insulating your hot water tank. If you have a newer tank chances are you don’t need to worry about this.

However, if your tank is older or you’ve recently purchased your house, you want to make sure that you have at least an R-value of 24 insulating your water tank. Not sure how to determine your R-value? According to the Department of Energy, just touch your water heater – if it’s warm, then it needs additional insulation.

If you find that your R-value is less, then adding insulation is your best bet. You can save between 7% and 16% on your heating costs by adding a water heater jacket or blanket. This simple upgrade, which should cost around $20, will yield a much higher return on investment in the long run. And better yet, it’s quick and easy to do! Follow these instructions:

  1. Shut off the water heater while you work.
  2. Cut the insulation blanket to the height of the water heater and wrap it around. (Make sure it isn’t covering the top)
  3. Mark and cut out the areas needed to allow you to reach the controls.
  4. Finish the installation and turn the water heater back on.

Insulate Your Hot Water Pipes

Everyone loves a nice, hot shower, but did you know that if your pipes aren’t insulated, your water is losing a significant amount of heat on its way from the water heater to your shower. By simply wrapping insulation around your hot water pipes you can increase the temperature of your water by 2° to 4°F. This allows you to actually lower your temperature control settings, as the water is staying hot by the time it gets to you.

The amount of money that you can save by doing this depends on how your house and piping system are laid out. Additionally, the type of fuel you use to heat the water and how much water you use will have an impact.

Installing insulation around the pipes is made incredibly simple by the use of insulation sleeves. Installation is as simple as measuring the length of the pipe, cutting the insulation and wrapping it around the pipe. You can use simple cable ties to secure it in place.

Seal Air Leaks with Caulk

One quick and easy way to make your house more insulated, which will ultimately allow you to reduce your heating costs and reduce your carbon footprint, is through sealing air leaks. Any air leaks that you have around your doors and windows will let the hot air out in the winter and cool air out in the summer. Luckily, this is an easy fix with a caulk gun. You just need to seal the areas around your doors and windows.

There are several options that you can use like aerosol cans and squeeze tubes. However, the most popular solution is a caulking gun and a standard tub of $2 caulk. If you want a specialty color it will cost you slightly more.

To seal any leaks, start off by cleaning the area thoroughly. Scrape off any old caulk or paint. Cut the tip of the caulk gun at a 45° angle and put it in the gun. Hold the gun at a 45° angle to the area you want to apply the caulk. Continue moving the tip of the gun around the door or window to apply a continuous line of caulk. To ensure that each crack and space is filled, use a damp finger, sponge or other object to make sure it has filled the cracks. You can use a damp rap to clean up any excess or mistakes.

Lower Water Heater Temperature

Turning down the temperature on your water heater is a good way to take advantage of energy efficient cost savings. The majority of water heaters are set to 140°F by the manufacturer but may only need to be set to 120°F. Lowering the temperature can help prevent scalding, reduce the speed at which mineral buildup and corrosion occur within the pipes, and save you money by reducing your energy usage.

Lowering the temperature setting will reduce the amount of standby loss that occurs, which is the heat you lose from the heater into the room that it is housed. If your temperature is set higher than it needs to be you could be throwing away around $31 to $61 each year. When you add in the amount that you save from consumption of water at a lower temperature you could save over $400.

The only reason you would want to consider keeping the temperature control set at 140°F is if you have a dishwasher without a booster heater. The appliance may need the higher temperature in order to reduce the risk of legionellae bacteria for individuals with suppressed immune systems or respiratory issues. Just note that when the heat is turned up this high it can cause scalding, so it is best to install mixing valves to lower the temperature to sinks and bathtubs.

Conclusion

The focus on going green is not a new concept. In fact, the millennial generation, even those who don’t own their own home, are highly invested in energy efficiency. As we continue to work on reducing our carbon footprint, it is important to do all that we can to make our homes more energy efficient.

Making your home more energy efficient does not always require a handyman. In fact, making these four energy efficient upgrades yourself is a great way to go green and stay within your budget. Going green does not always have to cost an arm and a leg, so start saving money and reducing your carbon footprint today.

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