Retail investors are bolstering the cleantech revolution, but firms providing innovative solutions deserve more support, argues crowdfunding platform Crowdcube’s Jonathan Keeling.
How important is climate change to your investments? Growing numbers of us are thinking about what our money is supporting, with institutional investors increasingly focusing on environmental, social and governance across their investments, reflecting both clients’ wishes and public sentiment more widely.
There is already some evidence that climate change is having a material impact on returns. Research from BlackRock, for example, shows the effect that storms, flooding, wildfires and hurricanes will have on three US asset classes – municipal bonds, commercial real estate, and utility stocks – warning that securities are already affected.
Meanwhile, it is retail investment sentiment around such information that drives share prices. Therefore, as certain sectors are affected by rising global temperatures, and/or attitudes towards that, so too increases the argument for retail investors to have exposure to cleantech – companies that are building a greener, lower-emissions future – via instruments such as exchange-traded funds.
Many of these companies are, however, still start-ups and just a few years old, or even with a product still in development. Despite historic high risk and low returns across the sector, investors want to support those in the vanguard of changing humanity's fortunes.
Crowdfunding offers them a way to engage with and invest in cleantech. At Crowdcube, we have witnessed a 110% increase in the number of cleantech companies listing on our platform. We have seen more than 17,000 people invest in cleantech companies and, as a sector, it has been the fastest to fund. The average public raise reaches its target in 17 days.
For these innovative start-ups, crowdfunding offers a way of raising capital from investors who become ambassadors for what they are trying to achieve – individually, and as part of the green movement.
On our platform alone, in addition to electric vehicles and wind farms, we have seen the likes of Recycling Technologies, a company which has built a machine that can turn waste plastic into a hydrocarbon fuel and plastic source that they call Plaxx, raise £3.7 million from 1,472 investors in two days last year – the first of two rounds.
Pavegen, which turns footsteps into energy via smart paving tiles, is currently raising for the second time on Crowdcube. Cornish Lithium, which is prospecting in the South West for the lithium that powers the batteries of now and the future, is currently over-funding at £1.2 million.
Despite it being early days in terms of investor outcomes, the cleantech crowdfunding phenomenon bears a resemblance to what we have seen in fintech: companies offering an improved product and disrupting the current market.
While cleantech investors may not be customers of the companies, more people backing them means a better network behind their solution, and a better chance of solving the problem that they are tackling.
And these businesses have demonstrable markets behind what they are building. ARC, an electric vehicle company, is backed by Jaguar Land Rover. Recycling Technologies has signed orders for Plaxx worth more than £7 million. The company, incidentally, has already doubled in paper value since its first round in January 2018. Cornish Lithium is part of a growing global lithium opportunity – a market projected to reach $92 billion by 2024 (it was worth $21.6 billion in 2018), tangibly reducing CO2 emissions and, in the case of companies like it, promising a reduction in Western reliance on a supply chain dominated by the Chinese.
But inadvertently falling into this bucket is not enough. The impetus to support these companies does not match the need. Punitive state controls on the oil and gas sector, and CO2 emissions should be paired with encouragement for cleantech investment. This is why we would like to see a Cleantech Enterprise Investment Scheme – CEIS – guaranteeing retail investors a 50% tax rebate, not just on the first £150,000 (as with the Seed Enterprise Investment Scheme) but on the first several million invested.
Institutions, corporations, and venture capitalists have a far greater role to play in funding, getting to market, and commercialising new technologies. But as long as retail investors want to take a punt on cleantech because they are keen to see it work – to see new private enterprise innovate where the state cannot – then let us ensure that the government supports that.
Jonathan Keeling is partnerships director at Crowdcube.