As the Paris Agreement to reduce carbon dioxide emissions comes into force, the UK’s first green ISA has opened to investors, paving the way for millions of savers and investors to take their money out of regular funds, which invest in global fossil fuel companies and invest it directly into profitable, local renewable energy projects instead.
Abundance, the investment platform which has raised more than £20 million for 21 renewable energy projects around the UK, was among the first peer-to-peer lending platforms to receive approval to launch the Government’s new “Innovative Finance” ISA (IFISA), which for the first time, allows investors who lend to people and businesses via peer-to-peer platforms to do so completely free of tax, up to a maximum of £15,240 a year.
The Abundance ISA is the first ISA in the UK that allows investors to start investing with as little as £5,
The first project to receive money from early-adopter Abundance IFISA investors will be a council-owned former landfill site in Swindon. The solar bond, which has an average annual rate of return of 6 per cent a year for 20 years, has won the backing of Sajiv Javid, secretary of State for Communities and Local Government, who said: “This is an excellent example of a local council working with the private sector to provide local people with a means of investing in their local community and its infrastructure. I wish it every success.”
This first project to be offered in the Abundance ISA follows the very successful launch earlier this year of the UK’s first council solar bond in partnership with Swindon Borough council, which sold out a month early. As with that first project, much of its popularity for investors is likely to be the majority co-investment from Swindon Borough Council, which reduces risk substantially.
Bruce Davis, cofounder and Joint Managing Director, Abundance, said: “We want to turn investing in ISAs from something gathering dust in the forgotten corner of a bank or riding the roller coaster of global stock markets into something that makes a difference in the real world. Investors’ money will be working harder than it would in the bank, boosting the UK’s green economy and sustainable infrastructure, and returns will be tax-free.
“Our second Swindon solar bond is just the start – we’ve got other exciting ISA investments on the way which can help ordinary people match their financial aspirations with their environmental values.”
Swindon resident Michael Szymanski, who has opened an Abundance ISA, said: “Energy diversity and energy independence is the way forward for the UK. Keeping the lights on through independent, local, renewable energy production is a must as part of the UK’s future energy production. Being able to invest my money towards this, where I know it will make a positive difference AND get a good return, tax free, is just the kind of sensible alignment we need more of in the UK.”
The new solar farm is expected to make a contribution from profits towards community initiatives and will help Swindon move closer to its goal to install 200MW of renewable capacity by 2020, enough to meet the equivalent electricity requirements of every home in the Borough.
Completion of Chapel Farm, which would have a capacity of 5 megawatts (MW), would take the total to 167MW – over 80% of the target.
It will be managed by a new limited company, wholly owned by Swindon Borough Council, and will start to generate energy by Spring next year. It will cost £5.4m to construct, with £3m coming from the council’s investment, and the remaining £2.4m from investors in the local community and across Britain, via Abundance.
Swindon Borough Council has already been approached by other local authorities looking to replicate its innovative solar bond model for funding green infrastructure. Revenues will be raised from selling the electricity generated, as well as support from the Renewable Obligation scheme (RO).
Councillor Dale Heenan, Swindon Borough Council Cabinet Member for Transport and Sustainability said: “I am proud that Swindon is the home of the UK’s first green energy ISA, following our very successful solar bond earlier this year. With interest rates still at rock bottom levels, the Abundance Innovative Finance ISA is a great way for people to invest in renewable energy tax-free.”
“This project marries the economic benefits of renewables with finding an innovative way for local residents to receive a healthy return on investing, it delivers a tangible financial benefit to local public services, and Swindon Council is even using part of its profits to build a much-needed sound barrier along the A419 dual carriageway! This is a hugely positive scheme.”