Karl Harder

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When we started work on Abundance back in late 2009 the idea of a member of the public investing as little as £5 in their local renewable energy project was unheard of. I lost count of the number of conversations we had with financial services experts who said that it was impossible. Seven years on, the industry in the UK at least is going mainstream, and the regulatory frameworks are being established across the EU that will allow for the rapid growth of the sector over the rest of the decade.

In the UK it took us four years to launch, and much of this time was spent with the UK Financial Conduct Authority getting ourselves authorised to run the business. Because we were the first of a kind, the regulator correctly took their time to fully understand our business, before coming to the conclusion that debt based investing into renewable energy was not an inappropriate place for ordinary people to invest their money. This was obviously a massive step forward and allowed us to launch, but it was only the first step. To achieve real growth in the UK market it is essential that crowdfunded investments can be held within mainstream tax wrappers such as personal pensions and ISA.

There is currently nearly £500bn of money held in UK ISAs, and most people who invest will first allocate money to their ISA before investing elsewhere. The good news is that after two years of work the UK Treasury as committed to launching an Innovative Finance ISA in 2016. This will enable people to come to a platform such as Abundance and open an ISA, through which they can invest their money in renewable energy projects and not be taxed on the returns. Up until now, people have largely only had the option to invest in global corporates via the public markets.

We are also expecting to see increasing options to hold crowdfunded investments in pensions. At a time when renewable energy subsidies are being reduced, being able to offer tax-free returns should reduce the cost of borrowing money through crowdfunding for project developers, making crowdfunding a more attractive option.

It is not just in the UK that the market is developing. Across Europe the regulation is falling into place to support the growth of the sector. Lumo in France has been waiting for approximately four years for French regulations to come in and, though the French crowdfunding regulation is far from perfect, it went live this year, giving Lumo the chance to get started and grow their business. Germany has also been tweaking its financial services regulation to support the emerging crowdfunding sector. Other countries that already have supportive regimes such as Holland are seeing solid growth of their renewables focused platforms.

At the local level the market looks set to flourish over the coming years. On the European level, though, there will be an increased policy focus in order to try to harmonise regulation across the EU, making it easier for citizens to invest across borders. We are part of an EU project called CitizEnergy which is attempting to launch an aggregator platform that can work cross border. The challenges with doing this are immense and it will take time to unpick the issues and truly realize a cross border platform. We’re doing it because cross boarder investing is something our clients consistently ask for, so for us it is a goal worth pursing. 

In order to realize a truly efficient cross boarder platform we need to unify financial services regulation across countries, but also support the creation of cost effective ways to move money across borders and ensure that all countries move to a point where it is possible to operate digital identity checks. My fear is that the regulation will be the slowest thing to move, but in terms of payment and identity checks the burgeoning fintech start up community is moving quickly. Payments and identity checks which until very recently were a sleepy backwater of financial services is now a competitive space of hungry young start-ups. Capitalizing on some of these new innovations we have started experimenting with offering our EU clients the choice of using TransferWise (a peer to peer foreign exchange service) for cross border money movements. 

So as we move into the second half of the decade it feels like the foundations have been laid for this emerging sector and I look forward to seeing considerable growth over the coming years.

Written by: Karl Harder, CEO of Abundance Generation

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