Digital finance for direct impact

The growth of financial investing via the web, and through apps on smartphones has created myriad new ways for the public to invest quickly and cheaply. Yet many of the options have been fairly conventional and arguably toothless when it comes to “impact investing.”

In a climate-conscious era, investors can choose to invest in companies that align with their ethics, not just seeking absolute returns, but aiming to avoid polluting companies or those with questionable operating environments.

Companies have taken note. In response, they have engaged in various forms of marketing, and some have been accused of greenwashing. Sustainability Reports tally direct and indirect greenhouse gas emissions and social impacts, but flashy data points and future net-zero targets are usually highlighted, with the hard data often hiding in a fog of complicated stats.

This raises dilemmas for green investors. Is an oil company really all that bad if it is investing profits into EV chargers, carbon capture, and funding new renewable ideas? The picture can be easily muddied. The ideal outcome is to invest in companies that prioritize optimal environmental, social, and governance (ESG) outcomes, which can be ranked. But a high ESG ranking no longer implies sustainability, especially when the “E” isn’t necessarily prioritized.

However, there are some digital apps and services out there seeking to establish ways for people to make green investments that deliver real carbon savings, putting climate impacts above all else.

Solar loans

One digital service targeting renewable energy investors is Trine, founded in Sweden in 2015. Trine’s website enables investors to choose to loan money to vetted companies working on solar and electrification projects. To date, more than €70 million ($70.4 million) has been directly invested, almost entirely towards solar.

Investment opportunities on Trine’s platform have a listed repayment interest rate and loan period. The project’s goals, risks, carbon emissions saved, and Trine’s own rating for the project, are also attached. An example project may be raising $1 million, repaid over 54 months at a rate of 5.0% annual interest, with funds to be used for battery-backed hybrid solar systems for off-grid industry.

Trine has thus far almost exclusively focused on two types of solar investment: solar home systems, and commercial and industrial (C&I) solar systems. Loans have been provided to well-known solar companies such as Bboxx, Greenlight Planet, Daystar Power, and more, with most funding for solar solutions in African households and businesses, some of which are being connected to an electricity supply for the first time.

“We’ve deployed a little bit north of €70 million, we have provided 2.5 million people with access to electricity, from very small systems, to C&I, at that level it is society building and supporting entrepreneurship and businesses,” says Trine’s co-founder and CEO Sam Manaberi. “Stable electricity is vital because when people don’t have that, they run diesel, so we’ve averted north of 700,000 tons of CO2, and money has been repaid to investors. We’ve proved that this works.”

Trine’s website tracks its loan efforts, and shows funds being received across countries like Nigeria, Kenya, Democratic Republic of the Congo, Ghana, Malawi, Vietnam, and more. Manaberi says Trine is focused on scaling, to “get up into the hundreds of millions and billions,” after the pandemic limited vetting opportunities for new projects due to travel restrictions.

Manaberi laughed when asked why Trine was founded. “Why did I start it? Why wouldn’t you! That’s my answer,” he says. “When we looked around, we asked why is this not around, why it wasn’t prevalent? It’s hard, but all investments, and all business dealings are hard. And we’re super proud, but not satisfied, and the entire team shares that view.”

Angel investing

Angel investing is also providing answers for those looking to embrace more direct green investments. Leapfunder, an online angel club, helps investors find investments in early-stage startups via a digital platform. This is very different from most traditional investments, and involves more risk, but also a more direct relationship and impact as an equity investor.

Tienko Rasker, CEO of Leapfunder, told pv magazine how it works as an online investment platform, and one of the biggest angel investing clubs in Northern Europe. “We believe the startup should have a personal relationship with every investor. The difference with investing on a stock market is clear: our investors become part of the extended team that is building the company. So that means the investors need to give active input from their own experience, and they feel emotionally part of the success,” said Rasker. “Because our investors are located worldwide we make sure all the investments can be legally closed online. Our syndicates are deliberately small: only about 10 to 15 investors.”

Rasker said that seeking to make a real difference as an investor means equity investment is “the most powerful instrument.”

Leapfunder has seen startups such as new Direct Air Capture ideas receive funding through its platform, with obvious green credentials. Other startups are green in other ways: for example, BikeFair, a pre-owned bike marketplace for buying and selling verified non-stolen bicycles, which has the outcome of encouraging mobility options outside of cars, and Mavuno, an AgriTech startup aiming to boost yields for African smallholder farmers.

Rasker said that the startup scene began orienting around more than just profits as part of a societal shift. “The startup scene is a direct reflection of the concerns and priorities of the next generation. Already 10 years ago we started seeing more startups that were concerned with making a cleaner and fairer world,” said Rasker. “Almost any founder, in any space, believes in the mantra ‘don’t be evil’. That means that we see almost all companies aiming to contribute to all people, and to the planet, in addition to generating a sustainable profit.”

Stock market investing

The most common investment remains stock market investing: buying publicly listed stocks in large companies, stockbrokers, and funds, which are all online and usually offer services via apps as well. Direct renewable energy investments are possible, by investing in known companies that produce solar or wind products, or by investing in exchange traded funds (ETFs), which are popular tools encouraged by the likes of Warren Buffett.

Yet, ETFs have added some headaches too. Impact investing by choosing companies or ETFs that are prominent in ESG investing, once shorthand for sustainable investing, has proven increasingly mired in complexity. Some options are emerging that avoid the ESG balance completely and keep things simple.

Clim8, a digital app for investors to make sustainable investments, is one example. Duncan Grierson, CEO at UK-based Clim8, said that it targets climate solutions first and operates like a traditional fund manager, pooling funds into a broad portfolio and investing on behalf of people.

“We’re a digital investing platform that’s focused on investing in climate solutions. We invest in six megatrends: clean energy, clean tech, smart mobility, sustainable food, and the circular economy. Clean energy and clean tech are the two largest parts of our portfolio,” says Grierson.

The company has already received more than GBP 15 million ($17.8 million) since being founded in late 2019, with investments split between adventurous, balanced, and cautious portfolios that tailor to investor risk appetite. Grierson says most choose the adventurous option, and says Clim8 delivers “proper green investing” in contrast to flawed ESG-directed investing.

“ESG was initially used as a risk management tool for removing the worst offenders, but it has since become a marketing tool. ESG has been used as a proxy for green investing, when it is not that at all. If you look at the largest ESG funds in the world, they’ll all have, in their top five stock holdings, Microsoft, Meta, and Spotify. They are not having a climate impact … that’s not impact investing” said Grierson. “We just don’t have time to waste the opportunity. We’re just focused on climate investing, and we make it super easy to do.”