I’ve been delighted at the growth in recent years of community share issues, supported by the joint Locality/Co-operatives UK community shares project based in Manchester. But I’ve also been increasingly concerned that some community groups, carried away probably by sheer enthusiasm, have been inviting people to buy shares without really having anything like an adequate business plan to show them. There will unfortunately undoubtedly be business failures, and investors who will lose money, as some of the early community share-funded initiatives unravel.
The Community Shares Standard Mark, being launched today, is an attempt to impose some basic minimum standards and give some kind of reassurance for would-be investors. It’s a sensible idea, even though it’s possible to quibble with the details: the standard mark is only available to ventures who pay for consultancy time from one of a set list of practitioners, for example.
Incidentally I like to claim that a workers’ coop I was once involved in was one of the first (perhaps even the first?) to appeal for capital from supporters in this sort of way (in our case through community loanstock rather than through community shares). This was in 1979, and enough money arrived to enable us to buy a shop premises in Milton Keynes. Anyone know of any earlier examples?
Two separate envelopes through the letterbox here today, both in different ways bearing encouraging news of the health of the cooperative movement.
One is the Spring 2015 newsletter of Rootstock, the ‘social investment’ cooperative society which offers withdrawable shares to its members as a means of raising capital to help cooperatives (mainly housing coops) working for social change. Rootstock was set up through the efforts of the Radical Routes network of coops and deserves to be better known. Rootstock investors’ money has since 1991 been used to make sixty loans to coops. Their website gives all the information investors need.
Valley Organics is a West Yorkshire based workers’ cooperative running an organic food shop which they purchased two years ago from its previous private owners. Valley Organics’ very attractively produced Annual Report seems to me a model of the sort of way that workers’ coops should share information with their friends and customers, with details of both the business’s financial performance and its ethical policy. The good news is that turnover is 35% up on projections. (“To be perfectly honest, we are a bit surprised to find ourselves running such a successful enterprise!” they say with refreshing candour.) Good for them.
‘Positive investment’ is what Jamie Hartzell calls the sort of ethical investment he’s concerned with. As he points out, ‘ethical investment’ in its traditional sense (as for example in the ethical unit trusts on the market) often includes holdings in firms such as Vodafone, Nestle and BNP Paribas – not necessarily everyone’s idea of ethical business.
By contrast, he suggests that ‘positive investment’ means initiatives such as the Ecology Building Society, Charity Bank, the Ethical Property Company, Traidcraft and Triodos Renewables – in fact, the sort of investments which his new organisation Ethex (= Ethical Exchange) is designed to promote.
I have interviewed Jamie by phone several times over the years (he was the leading light behind the Ethical Property Co, and I wrote a piece on the share issue which his firm launched back in 2002), but hadn’t met him until yesterday. Ethex is, in a sense, the necessary next step, given the growth in alternative investing which Ethical Property (and before that fair trade firms such as Traidcraft) have helped develop. The difficulty with positive investing has always been what happens later on when the original investors want to (or have to) sell their shares. The lack of a straightforward secondary market in these investments has always been a significant problem.
Ethex (launched earlier this year) provides a rough-and-ready solution to this, by providing a mechanism to put sellers and buyers in touch with each other. But because the number of relevant share and bond investments is still small and the number of trades also low, Ethex has sensibly chosen a broader remit for itself. It is hoping to develop a comprehensive website where would-be investors can find advice and details of other appropriate savings and investment products, including such things as the Ecology Building Society and Bristol credit union savings accounts.
When I met Jamie he was carrying a copy of a new report from Ethex, Positive Investing in the United Kingdom, which among other things identifies ten ‘hotspots’ where positive investors can particularly be found. (Yes, it does include some of the places you’d expect to find in such a list, including, I’m pleased to see, my own home town). The report is being published next week, which apparently has been designated Ethical Investment Week (news to me). It’s worth a look.