Ethex head of operations Sarah Flood wants to bring social investments into the mainstream
What are you and your organization most passionate about?
Ethex is the only positive investment and savings platform in the UK: a one-stop shop for the positive, or social investor. We are passionate about growing the positive investment market and taking it from niche to norm.
Positive investing is about choosing to save and invest in businesses that are changing the world for the better. These businesses have a clear social and environmental mission at their heart and work in areas like renewable energy, fair trade, social housing, organic farming or microfinance. All products listed on Ethex give a social and environmental as well as a financial return.
We would like to establish a movement of positive investors right across the UK and a capital stream for ethical businesses to develop and increase their impact to create a better and more sustainable world. This means disrupting current financial systems and do what the fair trade movement has done for the ethical supply chain. That’s a big, ongoing challenge for a not-for-profit start up with limited resources!
What is the greatest challenge facing your industry in the digital era?
Our biggest challenge is growing the market to make positive investing and saving mainstream. But to achieve significant growth, the choice and quality of products available needs to improve. Ethex lists a range of positive investment and savings products on the site – from savings and bank accounts savings to equity investments and funds – and across a range of businesses – from renewable energy and fair trade to social housing and organic food. We now need to expand the choice of products available to retail investors. For most people, bank accounts are the key point of contact with the financial system but currently there is currently no truly positive bank account available. We need to work with partners to ensure there is a wider range of products and types of social business to give investors real choice.
The second part of growing the market and increasing our impact is to make sure people are aware of the choices available. This is a big challenge for a small not-for-profit with a small marketing budget! Somehow we need to make a lot of noise to let people know there is an alternative way of saving and investing that makes money do good. Only then will we establish a movement of positive investors and a new capital stream for positive businesses to develop and increase their impact to create a better, more sustainable world.
The next challenge to growing the market is to create an effective secondary market so that those that have invested can realise their investments. This is a major disincentive to investors to commit their capital in the first place. From Ethex’s own experience, around half the people who might invest choose not to do so because of the fear of not being able to divest. And those that do invest put in significantly smaller amounts. At the moment Ethex’s secondary market is 3% of current business, compared to 98% of the London Stock Exchange’s.
How is your organization leveraging the crowd to create positive disruption? Tell us about your greatest accomplishment.
How we use our money is one of the most powerful ways we can make a difference and create a sustainable world. This includes the products we buy, the companies we buy from, the businesses we invest in, and the banks we trust with our money. We are used to making ethical choices about products we buy but there is now a growing movement of people that are thinking about the impact of their money.
On our platform, you can browse, compare and invest in a range of products from bank accounts and ISAs to equity investments and charity bonds that offer a social and environmental as well as a financial return. We provide a direct and personal way for individuals to take control of their money and invest in businesses they believe in.
Since January 2013, we have raised £30 million of investment for more than 55 charities, social businesses and community organizations. And in November 2015 we raised £1 million in a day! Ethex is now the top social investment platform in Europe. That’s not bad in just three years.
What were the most unexpected challenges you’ve encountered?
At the end of October 2015, the UK Government made a sudden and unexpected change to the Finance Bill, which excluded community energy schemes from Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) tax reliefs after 30th November 2015. This gave community energy organizations with projects in the pipeline a 5-week window to raise investment under EIS/SEIS tax reliefs and get their renewable energy schemes off the ground. Ethex had a rush of community energy share offers listing on the site. It was a big challenge with a large number of offers raising finance in a month but also an exciting opportunity for the Ethex to test the robustness and scaleability of the platform. We did it and had investment of £1 million in just a day and over £4.8 million in just a month. This was over a third of the investment – a sum of £12.5 million– raised into community energy projects across the UK during this period.
What is the single most important step your industry can take toward embracing the crowd economy in the next five years? Why?
The most important step we can take to embrace the crowd economy is to ensure that positive investing and saving is a real alternative to mainstream investing. Positive investing is about putting your money in businesses that you believe. These businesses are giving investors a financial as well as a social and environmental return and helping to create a better world. What is there not to like? It is about increasing the range of products available and ensuring people are aware that there are real alternatives as to where to put your money.
What advice do you have for people who want to apply crowdsourcing in their organization?
In short, a strong product. Ethex is a one-stop shop for the ethical or social investor. Ethex is a not-for-profit company and all businesses listing on Ethex have a clear social and environmental mission at their heart and work in areas like renewable energy, fair trade, social housing, organic farming and microfinance. The Ethex offering is clear and defined: on the platform you can easily browse, compare and invest in a wide range of positive investment and savings products from banks accounts and ISAs to equity investments and charity bonds that offer a social and environmental as well as a financial return.
What’s next for you and your business?
The Ethex platform is establishing a growing movement of positive investors and a new capital stream for ethical businesses to develop and create a better and more sustainable world. We are dedicated to making positive investing mainstream and would like to see everyone investing and saving in a way that brings benefit to society and helps finance a better world. We want to do what the fair trade movement has done for the ethical supply chain and see positive investment move from niche to norm.