The string of bad climate news detailed in a previous article reinforced my belief that we must use the power of capitalism to prepare civilization for climate adaptation.
Knowing how hard I and other VCs work to try to raise capital and dole out bits of the investment pot to entrepreneurs working on climate change adaptation and mitigation business ideas – only to miss out on a lot of good opportunities due to structural reasons – convinced me that it’s time for a Plan B.
My epiphany came while speaking with a Singaporean investor about venture capital and climate change investing. After bringing up the possibility of implementing a crowdfunding model, he suggested I speak with Louise Wilson, the co-founder and managing director of the UK firm which I mentioned before, Abundance Investment.
Abundance is an amazing firm. It provides a web platform that allows investors of various sizes – from elderly pensioners to local municipalities – to invest in specific projects related to renewable energy, the circular economy (see my article, The Future Is Circular), and, most recently, to affordable housing complexes.
For a company involved in renewable energy and social justice, you might expect those running it would be unwashed hippies working out of a converted, flower-patterned school bus. You couldn’t be more mistaken.
Abundance’s Louise Wilson is no muddle-headed flower child. She’s a heavy hitter with over 15 years at one of the world’s leading investment banks – Union Bank of Switzerland. There, she spent five years as head of the syndicate desk (the department that figures out the right price to sell a new company’s stock in an IPO) before stepping into the very visible and important position of head of European Equity Capital Markets.
Louise and the partners who started Abundance with her – Bruce Davis and Karl Harder – are people of stature who are throwing their weight behind a concept that is at once revolutionary and completely sensible. Create a system by which people can realize decent return on their money while funding projects that reflect their aspirations to build a fair, sustainable society.
Like me, Louise initially framed investments in the way of institutional investors everywhere – a balance between fear and greed. But, she told me, “As I spoke with more and more people outside of the investing world, the more I realized that their motivations had less to do with fear and greed and more to do with making a good financial return supporting things they care about and passing on something of value to their loved ones. It is not an either/or consideration.”
This emphasis – doing well by doing good – shines through in the language on Abundance’s site and in the focus of each of the projects Abundance supports. One thing I especially appreciate is that the “doing well” part of the equation is just as important as the “doing good” portion – the sustainability projects Abundance underwrites generate healthy returns for the investors on the Abundance platform.
Another thing that shines through at Abundance is accessibility. Abundance’s minimum investment size is £5 – about what you’d expect to pay for a couple of lattes in downtown London.
When I asked Louise about the low minimum investment, her take was particularly enlightening. “We know that £5 by itself is not going to do that much to change the world. However, we’ve seen that when someone invests £5 in a renewable energy project, they start to think about other ways they can conserve energy or otherwise make choices that are better for the environment. By investing even a small amount, they become personally invested in better outcomes.”
Louise also points out that despite maintaining a low minimum investment to spur wide adoption, the investments are serious. The average investor on the Abundance platform ends up investing around £15,000 ($19,500) in various projects.
Another feature that makes Abundance’s investments accessible is that they are structured as loans rather than equity ownership. Louise explained that because loaning money is conceptually easier to explain to most people and a lot easier to track success and failure, she and her partners decided to exclusively focus on providing debt capital to established technologies rather than providing riskier equity capital to untested start-ups.
The terms of the loans Abundance underwrites range from about a year to around 20 years, with a lot of choices in between, so meet the needs of investors with different investment time horizons. Abundance also allows for investors to invest their pension and retirement money in these projects and has set up a secondary market through which investors can sell their loans to other Abundance investors.
Abundance’s explanations regarding project finance also enhance the accessibility of the platform. Project finance is not, after all, something in which most waiters or taxi drivers have deep experience; however, waiters and taxi drivers do indeed invest quite knowledgeably and successfully through Abundance. I was particularly impressed by the straightforward explanations about the terms of the investments, the expected cash flows from them, and the success rate to date.
I asked Louise what she was most pleased about in her shift from an executive in a wood-paneled board room to an entrepreneur operating on a shoestring budget. She told me that since Abundance was founded, the firm has raised roughly £8 million for its own start-up expenses and development. That £8 million in seed money – trickled in over a number of years – built a platform that has launched fund-raisings for around 40 projects totaling over £100 million in socially responsible investments.
In other words, every pound that Abundance has raised has had a multiplier effect of over ten times! This 10:1 multiplier effect has spurred the funding of a wide range of sustainable projects while simultaneously taking a big step towards democratizing and personalizing the investing experience. That’s a big win in my book.
Louise knows, as I do, that the world cannot afford to wait for situation-normal solutions. We need the kind of Plan B that Abundance Investment provides. Intelligent investors take note!