Investing in the environment: Could money grow on trees?
14 April 2016
Over the past couple of months I have had the opportunity to contribute to a crowdfunding campaign for a nearby shop, buy shares in a local community energy project where I grew up, and respond to a consultation about how to support our local library. Setting aside the politics of funding cuts, it is clear to me that enterprises are having to be more innovative about how they raise funds and gain committed supporters.
This has also been the theme of work that NPC has undertaken in Northern Ireland (NI) with Building Change Trust and Northern Ireland Environmental Link. We researched the potential of using alternative sources of finance—distinct from the traditional grant model—to fund the environmental sector, which in NI is very focused on building sustainable communities.
The research, which included a sector survey, interviews, and workshops, found that there is a lot of interest from the environmental sector in using alternative finance—especially crowdfunding, community shares and loans from social investors. Of the survey respondents (which were mainly environmental NGOs in NI):
- Over half stated that social investment will help diversify income streams going forward.
- More than 60% said that social investment would be very or fairly important to their organisation in the next three years.
And there already are a few interesting projects taking place in NI, funded by Ulster Community and Investment Trust (UCIT) and Building Change Trust, among others. Several of these have been focused on community energy or bringing buildings back into community use. For example, Drumlin Wind Energy Co-Operative has raised two tranches of capital through a combination of community shares and loans, while Ligoniel Community Enterprises is providing office and retail space for local businesses, funded by a UCIT loan.
But the full potential for social investment—and other forms of non-grant finance—to support and increase the activities of environmental NGOs is not yet being realised. Our survey respondents said they are being held back by a lack of knowledge of where to go for advice and support on alternative sources of finance:
- 55% said they lack knowledge about the availability of funding and who to approach.
- 25% said they do not understand social investment.
Many also feel they do not have all the skills that might be required—in particular in terms of marketing and social impact measurement.
So NPC has recommended a three phased approach, used elsewhere in the United Kingdom, which involves firstly building awareness, secondly developing skills and finally providing investment readiness support.
While this report covers a specific sector in a specific area in the UK, we feel it reflects at a wider level how support and information is key to transforming appetite for new forms of finance into uptake. Charities increasingly need to adapt how they generate income or risk the health of their organisations. And it’s great to see that many are thinking about new sources like social investment and crowdfunding. But what many need is a bit of courage and a helping hand.
You can download the full report and the executive summary, here.