3 May 2011
Ingredients of Transition: Investing in Transition
Here is a last minute addition to the ingredients for the forthcoming ‘Transition Companion’. It is especially timely as OVESCO in Lewes’s share option has managed to raise £286, 600 is only £20,000 short of its target … if you live in an around Lewes, get your shares before 27th May!!
Money isn’t a neutral thing. The decisions we make with our investment choices either prop up and reinforce an economic model rooted in a past of cheap energy prices and climate irresponsibility, or they can help to bring forth a new, revitalised and more appropriate way of doing things.
“I think the last piece is seeing ourselves as part of the problem. Our consumption dollars, what drives the system, our investment dollars provide the foundation for the system. The more that we can create alternative systems by channeling our consumption and investment and convince others these are great ways of living, and consistent with what we’re trying to achieve long term, I think that’s the way we’re going to succeed”.
Making the kind of Transition that this book has argued for in the time that we have remaining will be an enormous, as well as an historic, venture. As we saw on earlier, successful localisation will require meaningful investment to make it happen. We have already looked at a range of ways of ‘plugging the leaks’ of our local economy (see Tool 19), but this final ingredient explores how investment on that scale might happen, and a range of possible mechanisms for enabling Transition to scale up sufficiently.
“OVESCO raises a quarter mil for community solar via people-power finance. If we replicate many times, we can begin to dream”.
Jeremy Leggett on Twitter, 1st May 2011.
For those of us fortunate enough to have investments, we do have some degree of control over choosing to invest in supporting local enterprises that actually work to strengthen the resilience of our local communities by providing renewable energy, food, transport, building materials and other essential goods and services for which there will always be a demand. Many of these opportunities may already exist. It is early days but there are many enticing opportunities that feel worth exploring, and could ultimately offer a more stable long-term investment than the global financial markets, as well as furthering the aims of Transition:
- Self Invested Personal Pensions (SIPPs): many people now have pension schemes which allow them to choose where it is invested. You can also transfer traditional pensions funds into a SIPP which then allows more flexible investment, including into local companies, land etc. (the rules of SIPPs set out the things that can, and can’t, be invested in). Transition offers the exciting possibility that such investment could be done collectively i.e. a number of people might invest their SIPP funds into a large piece of local land, which is then used to set up a Community Supported Agriculture scheme, or in a community renewable energy project.
- Local community-owned energy companies: e.g. TRESOC in Totnes, OVESCO in Lewes, Bath Community Energy and others… (see Tool 18)). These offer the opportunity for investments the results of which are highly visible in, and beneficial to, the community. One model for this would be to raise £100k (e.g. find 100 people willing to loan £1,000) then use this to raise more equity (e.g. from a bank) and then buy and install a wind turbine. The profits can be used to pay a reasonable return or interest rate to each investor, while also generating significant funding for local Transition projects.
- Community shares and bonds: Have your Transition initiative issue Community Bonds that raise funds for investing in local enterprises for a defined return, or Participation Bonds that also give you some equity in the enterprise. Some examples of this have already been seen in Tool 20 in so far as their use to underpin new businesses, but they can also be used for larger projects. The Development Trust Association have a long experience in supporting and informing community bonds or share launches and have some excellent tools available to support you with this[iii].
- A ‘Transition Social Investors Fund’: This would be a very exciting approach which is currently under consideration. At the moment most large philanthropic funders have a substantial endowment invested somewhere and then distribute as grants the interest that is generated. However, what might it look like if a significant part of their endowment were invested in local Transition infrastructure, still generating a good return, but enabling Transition at the local level? It could also invest in a range of Transition social enterprises that have to meet social and environmental criteria to be eligible, as well as a viable business case of course. This is a model Transition Network is currently actively exploring.
- Urban/rural Transition twinnings: it might also be worth exploring the ‘twinning’ of two (or more) Transition initiatives. For example, it might be that a rural Transition community has a great renewable energy asset, for example a powerful local river, or a very windy site, but can’t, on its own, raise the revenue to exploit it. At the same time there may well be an urban Transition initiative (or several) who don’t have such an opportunity but who would like to invest in community renewables and in supporting Transition. Bringing the two together could be hugely mutually beneficial. This is already being modelled in the River Cottage/British Gas ‘Energyshare’ initiative[iv], which enables the attraction of investment from a broader ‘community’ of people interested in investing in community renewables. The same model could also be applied to food, development and construction, or a range of other Transition projects.
- Transition revolving loan funds: here’s an evolving idea. Perhaps large investors and businesses out there who want to invest in a way that yields a good social return on their investment (i.e. they can see tangible social benefits arising from those investments) might invest in a ‘Transition revolving loan fund’. This would be part of a larger process (along the lines of Transition Network’s Reconomy project) of nurturing new Transition social enterprises and bringing them forward to a point of being investment-ready. The revolving loan fund would lend at below-commercial rates and would create a link between investment and the enabling of a new, resilience-focused economy.
This book has argued that, in the context of peak oil and the unravelling debt crisis, global economic growth will become increasingly unfeasible. However, within that, it is perfectly possible that one of the key areas where we will see economic activity and growth will be at that local level. Designing and enabling models that make inward investment into Transition possible will be a key tool in its successful implementation.
** IMPORTANT! You should take expert advice before making any financial investment and the above is not a recommendation to invest in Transition, just some ideas to mull over.**
The Transition movement needs, as it continues to scale up, to think seriously about models that will enable, with confidence, the levels of finance that active Transition will require to come forward. Many models for enabling this already exist, and new ones are emerging.
You might also enjoy….
Forming a legal entity (Tool 5), Building partnerships (1.11), Practical manifestations (2.2), The ‘Great Reskilling’ (2.3), How we communicate (2.4), Financing your Transition initiative (Tool 8), Ensuring land access (2.10), Working with local businesses (3.3), Social enterprise/entrepreneurship (4.2), Scaling up (4.3), Community renewable energy companies (Tool 18), Strategic local infrastructure (4.4), Tools for plugging the leaks (Tool 19), Community ownership of assets (4.6), Community supported farms, bakeries and breweries (Tool 20).
[ii] From an interview on Transition Culture which you can read in full at http://tinyurl.com/3t4e9vg.
[iii] A good overview guide is Hill, C, with assistance from Lynch, M. & Curtis, J. (2007) Community Share and Bond Issues: The sharpest tool in the box published by the Development Trust Association which can be downloaded from http://tinyurl.com/3bhke9w. Co-operatives UK’s document Investing in Community Shares offers a detailed guide for the potential investor, and can be found at http://tinyurl.com/44bc83w. A longer list of other useful resources on community shares is at http://www.communityshares.org.uk/resources.
3 May 9:07am
Rob – I like your idea regarding Self Invested but Personal Pensions (“SIPP”), but I fear that many of the providers may block these efforts. Although in theory you can invest into all the assets mentioned, many providers have their own internal policies that will prevent such investments. Perhaps the answer is to find a provider (or establish one) who is ready for these types of investment?
3 May 9:24am
It’s worth noting that there a a huge range of tracker funds which you can include in a SIPP, or invest in generally. These follow share indexes, sectors, commodities – more or less whatever you want. The main thing is the charges are much less than putting your money into an actively managed fund.
3 May 1:00pm
I think this is hugely important with great potential for the Transition Network.
There are many of us who do have some money to invest and collectively we could do great things. So-called ‘ethical funds’ are barely beter than conventional investments, and savings accounts pay almost no interest, but really, it is the opportunity to do something really constructive for your community that is exciting.