I recently put some savings into bonds using the UK’s Abundance platform which offers various methods of sustainable investment.
At that point, I contacted Abundance to ask them a few questions which I hadn’t found answers to on their website, and this is what they replied, which I’ll quote it verbatim since it’s all straight-forward stuff as far as sustainable investment goes.
So far they had 2 offerings where I could invest at the start. I wrote a ‘how-to’ guide about putting money into an account and judging the risks involved with the investments they offer, here: Green Investing with an Abundance ISA
Making a Sustainable Investment with Abundance: the Q&A
What percentage of the companies default, on average per annum?
As each investment offered through Abundance is stand-alone investment, with its own risk profile and return, there is not a default rate for Abundance as a whole (we are not the same as a peer to peer lending platform for example, where it is the platform that chooses the loans and categorises the risk and return according to their credit policy).
Since launching in 2012, we have raised funding for over 40 investments. Three of these investments were restructured (where the terms of the investment were changed with the approval of investors) after the companies ran in to difficulties, with the aim that the revised investment terms will allow the company to continue and return capital and a return to investors. Two other investments, both from the same company, have been unable to make the payments due to investors and are currently in default – the company is therefore looking at the best options available to get back on track or to return as much money as possible to investors.
How often do you offer new sustainable investments?
The number of investments we offer varies year to year and can fluctuate within the year with busier periods in terms of new investments followed by quieter periods. Over the last year we have launched fewer new investments as a result of uncertainty caused by both the COVID-19 pandemic and Brexit, however we expect to have more new investments launching this year. Over 9 years of operating we have launched 45 projects in total.
Are the initial offerings always auctions, or are they first come, first served?
When an investment is launched initially, it is open for direct investment on a first come, first served basis. So an investor can invest an amount of their choosing directly. We have recently launched a new investment, as you may have already seen, so you’ll be able to see the process for an open investment.
Once an investment has reached its target and closed, existing investors can then look to sell their investment on what we call the ‘marketplace’ to other investors if their circumstances change over the life of the investment. This process currently works like an auction, with a seller putting their investment up for sale, and interested buyers placing bids on how much they are willing to pay for the investment.
Is there any justification or explanation given for the instruments’ interest rate? Does it always reflect the perceived risk of the instrument, or the term, or anything else?
The return on offer for a particular investment is set by the company or council issuing the investment, however it is reviewed by Abundance as part of our own due diligence process to ensure it is a fair return for the nature of the investment.
The exact return will depend on a number of factors such as the nature of the business raising the money and the use of the funding, the risks for that project, as well as other elements of the investment offer such as the term, the repayment structure, or whether the investment is secured or unsecured.
Do you reasonably expect to increase the number of sustainable investment offerings in the future, and why?
Yes, we expect to launch a growing number of investments in the future, in the first instance, because we are hopefully (fingers crossed!) out of the worst of the economic uncertainty caused by the pandemic. This has caused many businesses to put projects and associated fundraising on hold over the last year, and in the case of councils who we also work with, much of their attention has rightfully be focused on meeting the day to day needs of their constituents during the crisis.
In the longer term, we are seeing a growing level of interest from businesses and councils who are looking to deliver the change we need to meet the UK’s Net Zero target, and looking to increase engagement by raising the funding needed from their stakeholders and the general public. We are looking to offer a broader range of investments, both in terms of risk profile, but also sectors, with our traditional focus on the energy sector broadening out to include other transition areas such as transport, housing and farming.
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.