Democratic finance is a new way of building on the success of peer-to-peer lending, crowdfunding and other forms of people-powered money schemes. But it's not just about the profits, it's also about promoting the benefits of renewable energy.
Leading this new movement is Bruce Davis, co-founder and joint managing director of Abundance Generation, an online investment platform that allows people to invest £5 or more in the renewable energy project of their choice.
“We started with a simple idea – to link up communities and individuals with renewable energy projects and make it possible for them to share in the benefits of energy production directly,” Mr Davis explained.
The concept is simple. Abundance raises the money a renewable project needs from individual investors and, once a target is reached, the project begins, or continues. The platform works with wind, solar, anaerobic-digestion and hydro projects at various stages of their development.
Investors, in return, share the financial benefits of the projects and can lock into inflation-beating returns, while knowing that their cash has been used to fund schemes they support.
“Banks and traditional financial services are failing to meet consumer demand for transparent, tangible investments offering good returns while helping the economy to grow,” Mr Davis said. “We aim to crowdfund more than £10m in renewable energy projects by the end of this year.”
The platform has already raised more than £2.3m this year to invest in three different projects, and this week launched its fourth.
The new project involves pre-installed solar panels on new-build housing projects across England, which will deliver free energy to the occupants while the sun shines.
Meanwhile ,investors will be offered an attractive return through the selling-on of any surplus electricity. The project is owned by Oakapple One, part of a renewable energy developer based in Leeds.
However, the development project is taking place in a number of locations: two in Barking, two in Hornchurch, both in east London, one in Peterborough, one in Boroughbridge in Yorkshire, two in Belvedere in Kent and one in Fulham, west London.
Abundance uses debentures, which are effectively long-term unsecured loans taken out by a company, which it agrees to repay at a specified date. Oakapple will repay its debenture after 20 years but will pay investors between 7.35 per cent and 8.6 per cent per year in twice-yearly payments in the meantime.
However, investors need to be prepared to tie up their cash for the length of the project to get the maximum benefit, although they may be able to sell their shares earlier if a buyer can be found through the Abundance website. For that reason, it's wise to check the investment opportunity carefully before signing up. It is not suitable for everyone, and an interest in renewable energy is what is likely to drive most investors to the Abundance site.
To find out about the current and future democratic finance projects, go to www.abundancegeneration.com.