How do you weigh up the return on your investments? Are you looking only for strong financial growth, or do you want your money to benefit people and the planet in some way? At Ethex, we believe you can have both.
Here we look at how we’ve helped thousands of positive investors enjoy a social and environmental return – as well as a financial one.
In February, Ethex launched its 10 Years of Impact Report, which looks back at a decade of direct impact investing through the platform. It celebrates some of the incredible achievements our community of everyday investors have helped make happen.
Looking at a decade of impact
As a pioneer in the impact investing space, Ethex prides itself on doing things differently. Our report shows more than just the topline impact we’ve helped create; it also explains why we do what we do and how we’re championing a people-powered approach to solving some of the most pressing issues we face as a society.
Over the last decade, over 200 projects have raised more than £120 million via Ethex through 25,000+ investments. In the absence of sufficient public or private funding, these projects represent initiatives that are taking climate action, building stronger communities, and creating a fairer society all across the UK.
And with millions raised to support social, environmental and community-led projects, we’re incredibly proud of what we’ve achieved so far. You can read the full report here.
Targeting a social, environmental AND financial return
While our celebrations have focused mainly on the social and environmental impact of investments through Ethex, there is another reason so many of our investors return to us time and again: the prospect of a fair return on their investments.
For the launch of our 10-year report, we commissioned a survey that showed 30 per cent of people would accept a higher level of risk or a lower rate of return on their investment if it is used to create a positive impact. We’ve heard this sentiment often from Ethex investors, who are investing for impact first.
However, while the investments offered by Ethex should be considered a higher risk, many of them also target an attractive rate of return, even in the current climate when other interest rates are high.
The Ethex Innovative Finance ISA also means that investors can hold eligible investments within a tax-free ISA wrapper, meaning any returns are free of tax.
What’s the risk?
Investment in any business, whether new or existing, carries risks as well as the possibility of rewards. When you invest through Ethex, you are investing directly into one project and organisation, so the possibility of any returns on your investment will depend on its success.
Ethex carries out rigorous due diligence checks on every potential investee on the platform, and we share full business plans and financial forecasts within each investment offer document. However,while you know your investment will help create a positive impact, you cannot be guaranteed a return in terms of interest or your capital.
Therefore, we always recommend investing through Ethex as part of a diversified portfolio and that people don’t invest more than they can afford to lose.
Demonstrating success
Having said this, we arepleased to say that Ethex has a strong track record of financial success in the investments we offer, along with the social and environmental impact. On average, the target gross interest paid to investors has been 4.6 per cent, and recent offers have generally offered higher rates as inflationary expectations have reawakened, with target interest rates on the platform typically between six to eight per cent in the past 12 months, reflecting the changes in the economic environment.
In terms of returns, we estimate that Ethex has paid more than £17 million in financial returns to thousands of investors from organisations that have raised finance with us.
And while the risk of losing your capital is inherent in direct investments into companies and projects, we’re pleased that the vast majority of organisations that have raised finance on Ethex are still operating (97 per cent) and our default rate is low.
That being said, we take any loss of capital very seriously, and we’re constantly strengthening our due diligence process with a larger, more experienced investment team. We also have a robust Investment Committee assessment process to ensure the suitability of projects for the platform. This includes their impact, financial viability and the way the organisation is governed.
The direct component of your investment portfolio
We encourage investors to consider investments in extraordinary organisations as a high-impact, direct part of their overall investment portfolio. So, for example, for investors who want to take action against climate change, we offer the opportunity to invest to directly in the creation of new community-run solar farms or the installation of solar panels on schools.
And for socially-minded investors, we offer opportunities to invest to directly in the construction of homes to help get vulnerable people off the streets or improve financial inclusion for families struggling with the cost-of-living crisis.
Investors in Ethex are helping us to democratise finance by providing the funding that pioneering grassroots organisations so desperately need to help them create solutions to the environmental and social issues we all face. We aim for investors to be rewarded with a decent financial return as well as the great feeling that comes with taking decisive action to make their money do good!
To learn more about what Ethex does and browse the current impact investing opportunities, visit www.ethex.org.uk.
Don’t invest unless you’re prepared to lose all the money you invest.
