If you are looking to support the wider co-operative movement, you could join the ranks of co-operatives who choose to invest some of their profits in other co-ops and community benefit societies. While perhaps not as straightforward as other forms of ethical investment, there are nevertheless various ways to do this, from share capital to loans and bonds.
According to Lisa Ashford, CEO of Ethex, the positive investment and savings platform, we are seeing “an explosion of interest from people who want to invest their money in community enterprises, including co-operatives, where it will earn a return and make an impact”.
You could choose to invest directly in a co-operative, or via a third-party loan fund. Co-operative and Community Finance (CCF), for example, offers investors the choice of several different funds, including the ICOF Community Capital Fund, which lends to worker co-operatives and other employee-owned businesses. Shares are withdrawable, and there is a maximum investment amount of £20,000. Investors include the Lincolnshire Co-op.
“The main benefit to investors is that they’re helping to support the co-operative movement,” said Ian Rothwell, of CCF. “More than half of the individuals and organisations who invest with us choose to waive their right to be paid interest.”
The Ecology Building Society has worked with CCF several times over the last few years, and recently made a new investment, in the form of a £500,000 loan. The money has been ring-fenced to support enterprises in disadvantaged communities, so Ecology has been able to take advantage of the Community Investment Tax Relief (CITR) scheme.
CCF loans money to approximately 40 co-operatives a year, which can range from childcare providers to community shops. One recent recipient is Roco Creative Co-op, which is raising funds to transform a row of empty Georgian houses in Sheffield into a new community-owned centre for artists, designers and makers.
When it comes to investing directly, either in the form of share capital or a loan, co-operatives often choose to invest in the same sector. For example, some long-running housing associations that have paid off their mortgages are now using their cash reserves to support newer housing co-ops. Other co-operatives choose to invest in areas of particular importance to their members. The Phone Co-op has invested £27,500 in community-owned renewable energy projects, for example.
As with any form of investment, there is always a risk involved, and your investment will not be covered by the Financial Services Compensation Scheme. However, by their very nature, co-operatives can often make for a lower-risk investment than other businesses.
“We’ve found that co-ops are more sustainable than other businesses,” says Ian Rothwell. “They’re more committed to what they’re doing; they have a purpose beyond profit and are usually ethical and environmentally sound. The people involved are prepared to put the work in.
“Team this with 40 years of experience, and the due diligence taken with every application, and you get a write-off rate of less than 3%. We’re the envy of other lending organisations!”
When it comes to ethical investment, there are two sides to the coin. Negative screening sees you screen out the type of activities that you don’t want to support. So, you might have a large portfolio of investments, but none of them are in the oil industry, for example. However, there’s no guarantee that your investments are making a positive contribution to society.
Positive investment, is different, as Fionn Travers-Smith, spokesman from Move Your Money, explains: “Positive investment is where an individual or organisation chooses to invest in organisations that make a positive contribution to communities, the environment or society as a whole. Investing in a co-operative can certainly be seen as a form of positive investment, as co-ops often have a social purpose, and are responsive to the needs of their members.”
As well as investments where there is a financial return to be made, or where the money can be withdrawn, many of the larger co-operatives, in particular, also choose to support the co-operative movement through grants or donations. Midcounties, for example, provided £280,000 worth of grants to support co-operatives in 2014. This included £100,000 to Co-operative Futures, a business development consultancy specialising in co-operative and community-led businesses.
Please note that the author and Co-operative News are not linked to any of the organisations mentioned and cannot accept responsibility for the advice given. This article is for information purposes only and does not represent financial advice.
If you are looking for further information about investing, the below links may be of interest.
Co-operative and Community Finance – www.coopfinance.co.uk
UK Sustainable Investment and Finance Association – www.uksif.org
Move Your Money – moveyourmoney.org.uk
EIRIS (provider of environmental, social and governance research for responsible investors) – www.eiris.org
Ethex – www.ethex.org.uk
