A true ‘win win’? Your views on our council investments
Since we launched our first council investment in 2020, around 2,000 of our investors have backed investments with eight innovative councils around the country, which are already delivering a real impact on the climate emergency.
And when we asked for our investors’ views in May, a hefty 76% of respondents were considering investing in councils this year. So what drives this appetite, and are there still barriers for councils to overcome to get more and more people engaged and helping with climate action plans?
Make a direct impact, and hold councils accountable for delivery
We all want our money to be making a real difference on climate change. And now, increasingly, delivering the green community infrastructure we need is falling to councils. Almost 600 have now declared climate emergencies, and we are working with some of the leading councils across the country to help them mobilise support to help them deliver it.
But our survey results show that councils still have work to do to show investors that they can really deliver on their (often ambitious) climate plans. It is little surprise that, in this era of broken political promises, that investors need to be convinced that councils will walk the walk on climate action.
This is where our council investments can make a really big difference. By publicly committing to these investments, councils are putting the spotlight on their Net Zero delivery plans, and ensuring we all can see exactly what they are doing to make them a reality. The very fact that they want to launch a public investment shows their commitment to delivering!
Our council investments are issued under Green Finance Frameworks, which give investors assurance for what the money invested will be used for, and allow them to comply with the same internationally recognised Green Loan Principles used by the Government for their green NS&I products and green gilts. In practical terms, it means councils can only use the funds raised for particular purposes, and investors will receive regular reports on progress.
Rising rates make low risk council investments a valuable part of a balanced portfolio
The rates of return on our council investments have risen in 2023 — reaching over 4%, having sat at around 1–2% for the first couple of years. This is due to the effect rising interest rates have on the borrowing rates for UK government and councils. (You can learn more about how rates are set on our council investments in this video, recorded earlier this year.) And these rising rates have made these investments more relevant to many of our investors.
The risk profile of a council investment has also been a key factor driving consideration. Of course, all investments carry risk. But the risks of lending to councils are very different from those of investing in companies. Unlike companies, councils can only remove debt from their balance sheet by paying it back. And government legislation requires that councils maintain a balanced budget to stay financially viable and, although councils can occasionally find themselves in situations where their income is less than their outgoings, they are legally obliged to bring this back into balance. (This means that no UK council has ever failed to paid back an ordinary loan.)
Investors know that a portfolio should have a balance of low and high-risk investments to suit their own financial needs. Traditionally, options for low-risk savings and investments have included different types of public lending, like products offered by National Savings and Investments (NS&I) or investing in government bonds (Gilts). And millions of UK savers and investors use this type of product to create a long term, low risk element of their financial plans. Our council investments can fulfil a similar role, with their regular interest and capital payments across the term, with the added impact that comes from helping deliver community climate projects around the country.
We believe it is impossible to deliver a greener future without backing the councils that are making it happen in towns, cities and villages across the country. And the unique blend of impact and low risk returns that our council investments offer can make them a really valuable part of any impact investors financial plans while they work towards that better future. We think that makes them a true ‘win win’.
All data quoted taken from the Abundance customer survey, conducted in May 2023 (884 completed responses)
RISK WARNING
As with any investment, there are risks when investing on Abundance. Your invested capital is at risk and any return on your investment depends on the ability of the company or council you have invested in to pay your returns. Investments on Abundance are generally long term and you should be prepared to hold them to maturity. The investments are illiquid and you may not be able to sell them if you need your money back earlier, and their value can rise or fall. Some investments may be secured, but this does not guarantee repayment or your return.
Quoted returns are no guarantee of future returns and past performance is not a guide to future performance. Specific risks will apply in relation to each investment. Please consider all risks before investing and read the Offer Document or Factsheet for each investment. The investments on Abundance include debentures or bonds and peer to peer loans — Abundance’s service in relation to loans is not covered by the Financial Services Compensation Scheme (FSCS).
