In the not-so-distant past, ethical investing was a mere speck on the horizon, barely visible beyond the sea of “traditional” investment opportunities.
But there’s a shift happening – a change in mindset which is inciting us to be more conscious of where we put our money.
Initiatives like Good Money Week have been raising awareness of responsible finance for years now, and it’s clear that the days when environmental, social and governance (ESG) strategies were seen as radical are long gone. In fact, there are now a plethora of different ethical investment options out there to choose from.
Major organisations are also jumping on the ESG bandwagon, and even fashion brands like Gucci have shown that they care about creating a more sustainable world by pledging to ban fur by next year.
But ethical investing isn’t a mere fashion trend. It’s one that looks set to become an integral part of investment portfolios for the long term, as we seek to address issues stemming from the earth’s finite resources.
P2P with a twist
This sea change should explain why investment firm Ethex has managed to scoop up so much support in its short history – raising more than £50m since 2013.
Its business model has a peer-to-peer lending feel – that is, it uses a digital platform to allow retail investors to lend to individuals and entrepreneurs.
But it comes with a twist, because Ethex is a not-for-profit organisation which lets you invest in companies that have a positive impact – socially and environmentally.
While Ethex has largely been focused on socially positive companies in the UK, it has now expanding internationally. The firm recently teamed up with Dutch crowdfunding company Lendahand to launch Energise Africa – an initiative that lets UK investors take a stake in solar systems in Africa, potentially returning up to six per cent on an annual basis.
It might sound like a hippy’s dream (or a bit “gap yarr” to the millennials), but here’s a company that wants to do good by the investors, as well as the people they invest in.
Its newest initiative, which has already raised £1m since its launch in August, provides renewable energy to the hundreds of millions of people in Sub-Saharan Africa who do not have access to electricity.
It works like this: you invest in a short term bond with a maturity of up to 36 months. The money invested in the bond provides working capital for a company (which has been carefully screened by Lendahand) to acquire solar kits.
The kits are sold to African households and businesses, which make regular monthly payments until they own the solar systems outright.
The solar company then pays you back part of your original capital every six months, as well as the interest.
When I meet the chief executive of Ethex, Lisa Ashford, she strikes me as a no-nonsense, inherently practical sort of person. And it’s solving problems practically that is at the heart of her company.
“It’s exciting because we’re empowering families, as well as young entrepreneurs,” Ashford says, pointing to Uganda, for example, which she describes as the “most entrepreneurial country in the world”.
Thriving business centres are now powered entirely by solar, and the growth potential is huge.
“There is this thirst for people to become self-sufficient and create businesses – it’s a booming population,” Ashford adds.
She also says helping children – whether that’s providing better quality light so they can study more or ensuring schools can do prep in the evenings – is by far the biggest benefit. “Education is key to making sure these children are growing up with the best possible help.”
And some of the indirect benefits to these African communities are more surprising. For example, being able to charge mobile phones means people can be connected financially.
If you want to get involved, the platform has a minimum investment of £50, which arguably makes it more accessible to younger generations.
Projects like this one certainly seem to appeal to millennials, who are far more interested in international development than their older counterparts. And a recent study from Ethex found that those under 40 years old were twice as likely to opt for positive investments.
“The impact of climate change is becoming more visible every day, and these dramatic changes have the potential to impact your life and the lives of others within your generation,” says Ashford.
But there also seems to be a tendency among millennials to want to make a positive difference and help to change the world for the better.
“People are disheartened by politics and the economy after the financial crisis – there is a general lack of trust in the system,” Ashford says, adding, however, that people have an opportunity to shape the world they live in, and are taking advantage of these opportunities.
Over the next three years, Ethex is trying to raise £20m to give energy access to more than 100,000 families – a huge feat for such a young firm. But it’s refreshing to see a company that wants to do good.
For investors, there are always going to be inherent risks of investing in emerging markets. But here is a company that isn’t centred entirely on making money for a change.
Ethex is focused on improving lives, and if projects like this one can make you money in the process, it’s a win-win for everyone.