Product from ethical investment platform Abundance and Swindon council allows public to invest in renewables tax-free.
What’s been described as the UK’s first “green energy” Isa is set to go on sale this weekend, and has received an endorsement of sorts from a senior government minister.
It is the result of a link-up between ethical investment platform Abundance and Swindon borough council, and will allow the public to invest directly in renewable energy projects, tax free. Those behind the scheme are holding out the prospect of a 6% return.
This type of investment has been made possible following the government’s 2014 decision to create an “innovative finance Isa”. This went live in April and means interest and gains from peer-to-peer loans can, in theory, be earned free of tax.
This month the rules were extended so that these Isas can also include debt-based crowdfunding, thereby allowing investors to lend money to alternative energy projects, among other things, in order to obtain a hopefully decent return.
Earlier this year Abundance and Swindon BC teamed up to launch a solar bond product, which will fund the construction of a £4.8m solar farm on council-owned land, with £3m invested by the local authority and just under £1.8m by small investors. That bond sold out a month early, says Abundance, and now there is another Swindon solar bond which can be held in the company’s innovative finance Isa wrapper.
A second solar farm is planned for a former landfill site in Blunsdon, north of Swindon, and is scheduled to start generating energy by spring next year. It will cost £5.4m to construct, with £3m coming from the council and the remaining £2.4m from investors in the community and across the country, via Abundance.
Abundance says the bond will have an estimated average annual rate of return of 6% over the 20-year term, with a minimum investment of £5. It adds that part of its appeal is likely to be the majority co-investment from Swindon council, which “reduces risk substantially”.
Those who put money into the scheme will be buying debentures, which are like official IOUs issued by companies which offer a fixed rate of return over a defined period. The Swindon solar bonds are a regulated investment and can be traded, but Abundance points out that estimated returns can be variable “and are no guarantee of the actual return”.
It adds: “As with any investment product there are risks. Part, or all, of the original invested capital may be at risk, and any return on the investment depends on the success of the project invested in.”
Communities secretary Sajid Javid says: “This is an excellent example of a local council working with the private sector to provide people with a means of investing in their local community and its infrastructure. I wish it every success.”
The solar farm will be managed by a new council-owned company. Councillor Dale Heenan, Swindon council cabinet member for transport and sustainability, says the scheme marries the economic benefits of renewables with finding an innovative way for people to receive a healthy investment return, adding: “I am proud Swindon is the home of the UK’s first green energy Isa following our very successful solar bond earlier this year.”
To find out more, go to: abundanceinvestment.com/swindon
The original article has been published on The Guardian
