Where are the investment opportunities?

Occasionally, when there is a lull in activity on the Triodos Crowdfunding platform, registered users reach out to us to understand why. The withdrawable share offer by Bristol Energy Coop is the only current investment opportunity, after the Fishtek Marine share offer closed earlier this year.

In order to work with a charity, renewable energy project, social enterprise, for-profit business or community organisation, we need to be very comfortable with both the mission alignment and the commercial rigour of the organisation:

- There has to be compelling societal and planetary benefit to their activities and a clear fit with the bank’s transition themes;

- We have to be satisfied with the financial position and performance of the organisation and of the prospects of the investment being repaid in line with the proposed terms;

- We also need to be confident in the management team and in their ability to provide robust stewardship of the organisation.

Inevitably, this is quite a high bar; for every 100 conversations we have with organisations seeking to raise capital, only a handful are suitable to work with us. Naturally, it takes time to identify suitable opportunities for the platform. We also have to bear in mind our regulatory responsibilities around the type of offers we present to our audiences and our duty to consumers.

In any given year we hope to host 4-6 investment opportunities on our platform, spanning our impact themes and offering different types of investments, all designed to appeal to as wide an investor audience as possible.

2024 has seen some particularly challenging macro factors and this has reduced the number of organisations seeking to take on repayable capital via our crowdfunding platform. While the Bank of England base rate was reduced to 5% in August, it is more than double the level it was two years ago. The interest rate on our bonds is not directly tied to base rate movements, but the pricing of crowdfunding bonds takes into account broader economic factors such as the cost of borrowing across the market. With this high interest rate environment, a number of prospective clients have opted to pause raising funding for growth plans or capital projects until interest rates fall.

General trading conditions have been challenging for many organisations we speak to; for example, where organisations are reliant on members of the public buying their goods and services and those consumers are facing cost of living pressures, those organisations can see their revenue streams and profitability impacted.

Inflationary pressures and rising labour costs have also proved challenging for some prospective clients and, with this rising cost base, some have chosen to put on hold plans to borrow.

These pressures all have a bearing on which organisations we consider sufficiently profitable and cash generative to be able to borrow money and comfortably repay.

On the equity front, despite the results from our past surveys indicating demand for EIS-qualifying shares offers, the pace of investment on our recent share offers for the likes of Mama Bamboo, New Gen and Fishtek has been slower than hoped. This has made us reflect on what share offers to present to investors going-forward.

Our activities, by their very nature, are lumpy, with the volume of investment opportunities typically reflecting the broader economic environment; we have seen similar lulls in past years and, within time, we anticipate bringing a diversity of impactful investment products to the platform. In the meantime, the team is undertaking advisory work in the nature recovery sector, supporting woodland and wildlife charitable trusts with sourcing funding for their restoration and biodiversity projects. We hope this is an emerging opportunity for future platform offers.