Cambridge entrepreneur Peter Dawe is relaunching his ethical investment vehicle, Cambridgeshire Provident Society, with a higher interest rate and a broader remit, as he seeks to build long-term trust among often nervous investors.The UK venture, whose branding ‘Not a Bank’ is designed to put distance between the venture and the lenders who triggered the global economic crisis, is also allowing backers to inject a smaller minimum investment than first envisaged.
The investment brief is also being widened from simply solar-related technologies to a much broader range of renewable energy plays but still firmly in the environmentally-friendly arena. Dawe says he had an encouraging level of investment activity and interest when the venture was officially launched in February and that these backers will have their investments transferred across so they can take advantage of an interest rate that is now nearly doubled – from the original three per cent to five per cent.
Dawe doesn’t believe he overestimated the appetite for ethical investments – rather that investors were generally more risk-averse than he calculated; burnt by the banking debt debacles. “I think it is more desirable to hold your hand up and acknowledge that investors are going to look at opportunities much more deeply and take their time in committing. So we have recognised the market sentiment, reassessed things after taking feedback and done a number of things.”
• The interest rate on offer is now five per cent – up from three per cent. As an EIS qualifying investment tax payers will see an equivalent seven per cent return
• The ceiling for an individual’s investment has been lowered from £10k to £1k
• The number of green technologies covered across the portfolio has been broadened to wider renewable energy plays, such as biomass
• The fundraising target has been lowered from a projected £20m over nine months to a more realistic £2m in six months, ramping up to £20m over time.
Dawe is also hoping that in three-five years, the Society will be in a position to recycle around five per cent of the total proceeds invested in good causes. He said: “What we have realised is that you earn trust. We haven’t been running ‘Not a Bank’ for a lot of years. Personally I think that makes us more trustworthy rather than less. But the cold fact is that if people think they are taking more of a risk we have to incentivise them more and prove our credibility over the long haul. We are doing that by giving them more interest and lowering the minimum amount they can entrust with us.
“The moves we have made allow people to better manage their own risk profile. We have also reconfigured the type of investments the Society will make. We will still invest in solar PV and so on but there are now some attractive returns from other renewable energy projects that often yield even better returns.
“Biomass heat generation is only one such example – woodchip boilers in other words. We can now cover a wide range of clean technologies in areas which the Government will wave money at, as they did with feed-in tariffs."
Dawe added: “We have far greater investment flexibility as a result of this and a larger potential project stream by leveraging money from government. We’re excited about that enhanced capability. There are a lot of new investment exchanges in the marketplace, they are doomed to bad publicity. Some have the potential to be as ugly a train crash as the banking crisis.
“There are some spivs out there and they will take grandmothers’ money, as they say, and blow it. The bad behaviour of a few can taint the whole industry. They offer no guarantee. And there is no honest mediator in there to ensure fair play. We intend to make Cambridgeshire Provident Society a much-needed exemplar. We feel repositioning ourselves will also create the feel of a solid financial instrument rather than a green, community type play which I accept can create a rather touchy feely attitude with investors.
“People still like ‘green’ and want to play their part in improving the environment. And there are a lot of highly profitable clean technologies. But within the investment community it is important that we are seen first and foremost as a financial instrument with good returns – with the bonus of helping society slash its carbon footprint for the good of everybody.