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Retail investor funding floods into sustainability firms

by LLB Reporter
8th Jun 22 10:40 am

Retail investors are putting over seven times as much money into green and sustainable businesses today than they did five years ago, according to new data from the European marketplace for retail investment into private companies Crowdcube.

Over the past half-decade, the platform, which gives its community of one million investors the opportunity to put their money into some of Europe’s fastest-growing private companies, has seen annual investment into green or sustainable companies rise from £5.5m in 2017 to £41.1m in the year from March 2021 to April 2022.

This trend of investment as a form of environmentalism is also reflected in the number of investors that green ‘pitches’ attract, with the average green business receiving backing from 29% more investors than those which were not categorised as green or sustainable.

The desire for green investment has, so far, been fed by the ever-increasing amount of green businesses that are looking to obtain funding from ‘the crowd’, which refers to the growing number of retail investors choosing to put their capital into private companies. In 2021 Crowdcube saw six times the number of green and sustainable businesses turn to its platform for investment than they did in 2017.

One such business is Finisterre, a sustainable outdoor clothing brand which, in 2018, became B-Corp certified (this an independently assessed evaluation that a company operates with best environmental, social and governance practices). Speaking on the research, its founder, Tom Kay, said: “The clear appetite among retail investors to back sustainable and genuinely purposeful businesses was one of the big factors in us turning to them to get financial backing for our ambitious growth plans. They know, like us, that the ocean’s future is our future, and that contributing to the climate crisis will only do our business a disservice in the long run. It is encouraging – if unsurprising – to see the number of people prioritising our planet in their investments has risen to such a drastic extent as the reality of our environmental fragility dawns on more and more of them, and platforms like Crowdcube enable them to take direct action.”

The exact source of this funding, however, is somewhat unexpected. Whereas mainstream narratives depict younger investors as the ones leading the drive towards ESG and wider environmental investment, Crowdcube’s research found the reality to be less simplistic.

The age group with the largest percentage of their portfolios invested in green and sustainable businesses was in fact the over 65s, the oldest demographic assessed in the data. This generation has almost double the proportion of its combined investments in sustainable ventures than the 25-34 bracket. Meanwhile, investment from under 35s counted for just 14.6% of the total amount of the overall money in green businesses.

However, looking at the number of investors, rather than the total investment, the picture changes. The same 18-35 age bracket with under 15% of the total sum of green investment contains nearly a third (30.4%) of the total number of investors with a stake in a company within this business category, suggesting that, were younger investors to have more expendable income or larger cash reserves, they would be more full-throated in their environmental investment.

Matt Cooper, Chief Commercial Officer at Crowdcube, commented: “Our data shows the retail investment community to be teeming with vigour and passion to help solve the biggest climate issues facing society today. Its members see the start-up and growth-stage sectors as the long-term future of the economy, and are naturally turning to private businesses that could give them a positive financial return, without having a negative environmental one.

“Fast-growing businesses that put the environment at the heart of everything they do would be irrational not to consider turning to the crowd when looking for funding; it is made up of passionate, committed investors whose values will align perfectly with your own.”

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