Eco-Bonds Prove Hugely Popular with Green Investors
Image credit: Ecotricity
TreeHugger has looked before at investing green in the midst of economic turmoil, even offering specific quick green investing tips. But Dale Vince and the folks at Ecotricity have created a new financial product to make investing in low carbon infrastructure easier than ever.
When I wrote about the UK's first utility-scale solar power plant, I mentioned that it was being partly funded by an issue of "EcoBonds" from Ecotricity direct to their customers and other would-be investors. (Ecotricity customers were offered an extra 0.5% interest on their loans compared to other investors.)
The offer, which came at a time of historic lows in interest rates being offered to savers, proved to be a runaway success. In fact, the company ended up receiving applications for over £15 million—which was £5 million over its target. In a blog post over at ZeroCarbonista, Dale Vince explains a little more about the motivation behind the EcoBonds, and why they were needed.
Vince explains that—following Ecotricity's business model of using profits from customers' energy bills to finance new clean energy projects—they had always known there would come a time when the financing needed for planned projects would be much more than their current customer-base could support. With bank lending rates still high, and with customers constantly asking how they could get financially involved in the company's efforts, Ecotricity decided they could do for finance what they once did for the energy sector—cut out the middle man:
"...we were also aware that bank rates for savers were at historical lows; despite the fact that banks were asking very high rates from businesses that they were prepared to lend to. It seems like the incredibly low base lending rate (0.5%) is only relevant to savers (what the banks pay) and not to borrowers, strange that. There are probably something like five percentage points difference, between what a bank pays savers and what it charges borrowers like us. We thought that was a bit of a rip off.
And so our Ecobond became a way to 'cut out the middlemen' the banks who, post the credit crunch were paying savers very little, while lending to business for much more. We thought Ecobonds could introduce a little fairness into the financial sector."
With the bonds selling out so fast, Ecotricity had to turn away over £5 million worth of potential investment, presumably disappointing many would-be green financiers. But this is, apparently, only the beginning. With 150MW in the planning system now and another 100MW expected to go in during 2011, there is no doubt that more financing will be needed soon. Another issue of Ecobonds is planned for the end of this summer, ready to provide much-needed funds for 2012 construction projects.
Watch this space.
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