How to Invest with Abundance – Impact Platform Review
Learn how to invest with Abundance Investment – a British impact investing platform that connects investors with green and social projects in the UK. It is possible to start investing with as low as 5 pounds! We review the platform and show how to invest for impact with Abundance.
Intro
The main project types or sectors offered by Abundance are renewable energy (wind, solar, tidal), energy storage, waste management, and more recently, social housing and councils.
The company was incorporated in 2009 and their first project was a community-sized wind turbine in the Forest of Dean. Abundance Investment was founded by Bruce Davis, Louise Wilson, and Karl Harder and aims to implement “democratic finance”, by making impact investment opportunities accessible to everyone.
The three founders bring a good combination of experiences in crowdfunding, banking, and renewable energy. The company has 32 employees listed on LinkedIn.
Update: Financials deep-dive
According to Crunchbase, the company had 3 funding rounds resulting in total funding of GPB 4.9 million. The largest amount, GPB 3.0 million, was injected in August 2013. Abundance raised another GBP 1.6 million in 2018 through a crowdfunding campaign on Seedrs. According to SimilarWeb, the company’s website receives an average of 20,000 monthly visits.
The company has been operating at losses and have not yet reached break-even. According to the financial report published at the Companies House, the directors of Abundance Investment expect the company to continue to invest for growth, ahead of income and expect it to incur losses over the coming years.
| Values in GBPm | 2019 | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| Revenue | 1.84 | 2.13 | 1.63 | 0.71 |
| Profit Losses | -0.97 | -0.53 | -0.56 | -0.68 |
| Main expenses | ||||
| Admin. Expenses | -2.95 | -2.78 | -2.28 | -1.47 |
| Balance Sheet | ||||
| Total assets | 1.19 | 2.31 | 0.6 | 0.78 |
| Creditors: due within one yer | -0.46 | -0.56 | -0.17 | -0.09 |
| Net Current Assets | 0.74 | 1.74 | 0.44 | 0.69 |
The revenue decrease in 2019 is mainly attributed to market uncertainties related to Brexit. Administrative expenses, the company’s largest expenses, have been over GBP 2 million during 2018 and 2017 and are closer to GBP 3.0 million in 2019. The debt is under control and mainly short-term since it’s due in less than one year.
Abundance Investment in numbers
Numbers from August 2020
Main company stats:
- Fully-funded projects: 42
- Total amount invested: GBP 104.6 million
- Total repaid to investors: GBP 27.3 million
- Average project size: GBP 2.5 million
Investor’s stats:
- Minimum investment: 5 GBP
- Annual interest rate: 4% – 15%
- Number of investors: 6,600 (Feb 2020)
Certification and Awards
FCA: Abundance Investment is a company authorized and regulated by the Financial Conduct Authority (FCA). This allows the company to operate in the UK and the EEA (European Economy Area) by offering pensions and investment services.
Ethical consumer: Abundance Investment received the “Ethical Consumer Best Buy” label, under the category “Ethical Investment Funds”, which recognizes Abundance projects as fossil-free and fully transparent.
B Corp: In 2019 Abundance became a certified B Corporation. Businesses certified as B Corp have “E2F0D9the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.”
How does the Abundance impact platform work
Abundance Investment is mainly targeting projects in the UK to be funded by investors with British and European residence.
Portfolio types
Abundance ISA: If you are a UK resident, you can open an Abundance ISA (Individual Savings Account), which has the benefit of being tax-free. That means that up to the ISA allowance of GBP 20,000, tax year 2020/2021, you will not pay taxes. Bear in mind that Community Municipal Investments are not currently ISA eligible.
Standard Portfolio: If you are not-UK resident, you can only open a Standard Portfolio, which is taxable.
Pension Portfolio: For UK residents, it is also possible to open a pension account which is provided by Gaudi Regulated Services Limited and can be used to target tax-free long-term investments. The pension account has a minimal investment of GBP 5,000 and several fees (setup fee, annual fee, benefit fee, and transfer fees).
Special note for non-UK residents: Residents of the European Economic Area (EEA) or Switzerland can invest with Abundance. US citizens cannot invest in Abundance.
Currency risk: Non-UK investors will be subject to currency variations throughout the project lifetime.
Withdrawal fee: Investors that signed up for the platform after 1 November 2017 will have an extra charge of £5 per international withdrawal.
Tax withheld: Investments that were issued after 6 April 2017, will have 20% of the interest payments on Abundance deducted as tax and paid to HMRC (HM Revenue and Customs) directly.
Non-UK resident investors should be aware of the conditions above and should avoid withdrawing amounts below GBP 1,000 (e.g. withdrawing only GBP 100 would result in a 5% loss of your investment!). Moreover, investors should be sure that the 20% tax withheld in the UK would not be double-taxed by the tax authority of their respective country of residence.
Investment types
Abundance Investment offers two types of investments: issued by companies (company investments) and issued by local authorities (municipal investments). The investments are debt investments, meaning that investors will be lending money directly to the investment issuers:
- Company investments focuses on directly funding companies that promote innovative businesses (renewable energy and social housing projects). Company investments offer a wide range of risk and return.
- Community Municipal Investments or CMI focuses on investments in councils across the UK and offer much lower risk and, consequently, returns.
- Abundance also offers a secondary market, or Marketplace, as they call it, where investors can trade existing investments. By Q3 2018 a total of GBP 2.9 million have been traded on the marketplace. As of August 2020, out of the total 42 projects funded, 26 were available at the Marketplace.
Abundance Marketplace has interesting features such as the history of all trades and volume traded, 12-month avg. price of trades and even a calculator where you can see how the price you are willing to bid will impact your investment return (ROI) during the remaining time of the investment.
Most projects on the marketplace are traded at a premium, sometimes even above 10%-15% of the original price. By the time of writing only one project – Monnow Valley CHP – was traded at a discount, which is facing financial difficulties and has overdue payments.
Lately Abundance has been focusing on Community Municipal Investments, significantly reducing the number of offers for Company Investments.
Due diligence of Abundance impact projects
Abundance Investment has a very thorough and detailed process to select and perform due diligence on potential projects.
Step 1 – Groundwork to bring new investments to the platform: Abundance has a dedicated team that source the range of possible investments. They aim to find projects that are looking to offer debt investments and that will help deliver a Net Zero future in the UK.
Net Zero: new target will require the UK to bring all greenhouse gas emissions to net zero by 2050.
Step 2 – Focus on quality in execution: After the identification, they move into the execution phase, which varies depending on the debt issuer. Here is where the detailed due diligence takes place, assessing the technical, legal, corporate, and financial aspects of the investment. The company concludes the due diligence with the legal work required to produce the investor documentation, called Offer Document, which can be found at each investment page.
Step 3 – Long term service for long term investments: After the project is funded Abundance works closely with each company or local authority to manage the interest payments over the project lifetime, to provide updates to investors, and perform additional services such as platform maintenance and administration of the marketplace.
What are the risks and guarantees when investing with Abundance?
Risks
Abundance makes it clear that they are not financial advisors and that investors have to make their own decisions: “You must choose the investments you want to make on Abundance and each investment will have a different return, length of term and risks that you should consider carefully.”
Like with most crowdlending platforms your investment will be at risk, including:
- Capital at risk: Investors are lending directly to businesses which might incur in financial difficulties and not be able to pay back the principal and/or interests. Abundance does not guarantee any share of your investment.
- Diversification: Investors should consider diversifying their investments across different project types and issues.
- Long-term: Different from most consumer loan platforms, Abundance has projects that run for a longer period, in some cases for more than 10 years. Investors should be aware of the long-term and potential challenges of selling their investment in the marketplace.
- Marketplace: It was not designed to work as a stock exchange and does not offer high liquidity, which might result in sales with losses for the investors, or in extreme cases, investors might not be able to sell investments at all.
- Insolvency: Being regulated by FCA, Abundance must demonstrate how it administers the investments and how it mitigates potential impacts on its investors. If Abundance goes out of business, the Marketplace would potentially close and investors would have to recover their investments directly with the project issuers. Abundance has a process in place and has appointed a global restructuring firm (RSM UK) to step in and administer the outstanding investments in case of insolvency.
Complimentary to the disclaimers above, Abundance also requests investors to answer a questionnaire, whenever a new investment is made, to ensure that investors are aware of the risks involved when investing with Abundance. The questionnaire includes the seven questions below:
1. Am I guaranteed to get back all the money I invest into a company?
2. As I am making an investment there are risks, however, these risks are unlikely, and I should expect to receive my investment returns even if the company runs into difficulties?
3. Are the risks the same for each investment?
4. Do I have to make my own investment decisions on Abundance?
5. Can I get my investment back early?
6. If I sell an investment am I guaranteed to get all my capital back?
7. What will happen to my investments if Abundance goes out of business?
Guarantees
Abundance Investment does not offer any financial guarantees to investors. However, the company is regulated by FCA and offers one of the most complete due diligence (Offer Document) among crowdlending platforms.
Impact
Abundance Investment does not offer an easy way to track the environmental and social impact of investments. They do have detailed fact sheets, called Offer Document, that sometimes discloses potential savings in CO2 emissions, depending on the nature of the project. Considering that most of the Abundance projects are renewable energy projects, savings in CO2 emissions could be easily estimated per invested amount, giving investors an idea of how much their financial contribution is impacting the environment.
The social impact, such as job creations, the number of people benefited by affordable housing, or impact in the local community could also be communicated in a more structured way so that investors could compare projects and track their social impact progress.
Overall, the impact information is not easily accessible and, more importantly, cannot be seen by investors at a portfolio level. Considering that Abundance Investment is an impact investing platform we would expect a better disclosure and transparency on the environmental and social impact that the company and its projects are bringing forward to the crowd.
Conclusion of Abundance review
Abundance has one of the most user-friendly websites among crowdfunding platforms. They have a strong communication team with a vast presence on social media (LinkedIn, Medium, and Facebook) and, more importantly, are authorized and regulated by FCA.
The number of projects available for investment is not abundant, making it challenging for investors to create a diversified portfolio from the start. However, the thorough due diligence and large size of the projects allows investors to be comfortable with investing more than the minimum of GBP 5.
Financial returns are attractive, especially for renewable energy projects, frequently with interest rates above 10% per year. Social housing and Community Municipal Investments offer lower returns, usually with interest rates up to 7% per year.
The Marketplace offers great features and transparency. It is a good option for investors to trade their investments if they wish to exit the investment before due time. However, it should not be perceived as a “live trading market” since liquidity is limited.
A point of improvement for Abundance Investment is to better disclose the impact that their projects are bringing to the environment and society. Impact investors need to be able to access the impact of their investments and to track it at a portfolio level.
If you are interested in supporting a UK-based business by providing debt investments that target innovative renewable energy, social housing, and community projects – and appreciate our analysis in this platform review – then can decide to invest with Abundance Investment.
Abundance Review
Summary
Abundance Investment has a slick platform, strong communication team and diverse types of projects. The returns offered can be above average, however it is not easy for investors to track the impact of their investments.
Not investment advice: The information provided on this website is intended for general information purposes only and does not constitute investment advice, financial advice, trading advice, or any other sort of advice. You should conduct your due diligence and, if necessary, consult a qualified independent financial advisor before making any investment decision.
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