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Focus: Interview-Sit down with Julia Groves, Trillion Fund


Render Positive

Julia Groves, managing director of Trillion Fund and a director of the UK Crowdfunding Association, shares her insights on renewable energy investment in the UK.

Trillion Fund is the British crowdfunding platform that specialises in raising money for renewable energy projects worldwide – and which has just reached a landmark of its own. The platforms merger with Buzzbnk, which focuses on the social enterprise sector, is set to create the UK’s largest social crowdfunding service. Trillion Fund is here to create the opportunities to make a decent return on an investment whilst giving a little bit back to the environment at the same time.

UK-based Render Positive recently sat down with Groves to discuss a variety of issues, including her thoughts about financial marketing, market disruption crowdfunding and much more.

Following are excerpts of that interview:

Q: Exactly what does Trillion Fund do?
Julia Groves: Trillion Fund raises money from ordinary investors like you and me, and gets them to move it out of the “dirty stuff” into the “clean stuff.” So we’re trying to give everyone a chance to profit from renewable energy and accelerate the switch towards a low-carbon, decentralised energy future.

Q: How disruptive would you think companies such as Trillion Fund are to the existing situation?
JG: For whatever nutty reason, we are trying to radically change both the energy market and the financial market. It started off being about the fact that we’re all paying fairly silly prices for electricity, and that these big companies who are making beautiful returns from that aren’t reinvesting it in longer term sustainable solutions, and I happen to think there might be a slight climate issue.
   The name Trillion came from the amount of money that we have to raise and invest in renewables to stop the planet going more than two degrees above where it is. That’s where it all came from. But what became clear very quickly is that we couldn’t actually crowd fund renewables, which is what we want to do, unless we changed the financial regulations at the same time.
   So it’s double disruptive; we’re trying to decentralise energy and we’re trying to democratise finance. It’s possibly slightly ambitious, except that will never get in my way; you know that, and so a lot of the work over the last year has been about fundamentally changing the regulations and the tax conditions in financial services to remove the barriers to innovation coming through.
So we’re getting some retaliation. I think that’s always a good sign of disruption.

Q: So, for the people investing in projects, what is their main reason for doing it? Is it the possibility of better returns, or is it they’re shaping the world in a way that they like?
JG: This is my third renewable business: I did a vertical access wind turbine company; I did a solar business; I’ve been working in it for over 10 years. I’ve tried everything to try and get people to move their money, and the only motivation which really works is profit. There’s just not enough people out there who can afford to pay more for things because they’re low carbon, or will compromise returns because it’s the right thing to do.
   So trading is using profit as motivation, and it’s about getting the most decent return you can for your money, and I think the issue in renewable energy and in ‘fintech’ to some extent is that you have to have £10,000 to get to the table, and that rules out the vast majority of people, including me, because if you work in a start-up you don’t have 10 grand to throw around, otherwise you’d put it into the business.
   So it’s absolutely about profit as the motivation, and the reality is all of our projects offer between six-and-a-half to seven-and-a-half percent return against existing performing assets, and it’s just that much more than you can get in the bank. Therefore, it’s worth taking a bit of a risk to get access to those returns.

Q: So you’ve got a bit of an advantage because the banks don’t have the best, rosiest reputation since 2008 or ever – but since then especially, but they also do have the benefit of inertia. Our previous guest, Rory Sutherland, is very much into behavioural economics. How do you change people’s behaviour, both on the investor side and on the project side, into understanding this new situation that you’re trying to create?
JG: Very simplistically, I would always look at the opportunity for change and look for the usual three things. One, is there sufficient dissatisfaction with the status quo? Are people really, really not happy with where they are?
On the other end of the spectrum, are there real alternatives coming through? That means scale and quality, alternative places to put your money. And then the third element is simply; what is the level of pain involved in switching from one to the other?
     Since 2008 the level of trust in the banks is very, very low, but also from a policy and governmental perspective, they’ve really realised that unless they can introduce some diversity into financial services, we’re always going to have five banks that are too big to fail and too big to jail. So actually that diversification is not just about more choice for people for where to put their money. It also underpins financial stability going forward. So that’s why Osborne is all over alternative finance.
     There’s also a view that the economic recovery is going to be led by smaller companies, and those are the ones who can’t get the money because the banks can’t lend because they’re restricted about the ratio of how much they have to have in savings and how much they can lend out.
    So I think there’s a combination of a huge wave of innovation in fintech coming through, 85 funding platforms. We’ve also been much more successful than the Americans in negotiating the regulations. We’ve been at that relentlessly for two years. I mean eventually people just give up, you know, just get her out of the room, just give her what she wants and make her leave.
     To your point about inertia…I think we’ve got a challenge to build trust quickly in the industry; that’s why regulation is so important. But there’s been so little innovation for so long, and the banks can’t take any risks whatsoever, and they’re burdened with a huge amount of hefty regulation which we don’t have.
     So we think we’re nimbler. We think we’re more customer focused. We think we are facilitators, not institutions, and as the demand is there, the alternatives are coming through. So the next two to five years, it’s just about moving all those barriers and making it easy for people to switch from one to the other.

Q: At some point are the banks going to get worried if you do become extremely successful? When do you think they’ll start?
JG: There’s some signs of retaliation already, but inherently we are addressing a market that they can’t really address. I think there’s potentially an impact of savings moving en masse, but they really have neither the will nor the way to do the lending to SMEs that we’re doing. They’ve got rid of all of their high street business lenders, and we are much more efficient. The whole thing is done through technology.
    We’re aggregating a lot of people with a smaller amount of money, and people with a smaller amount of money have lower expectations of return, so whenever we raise a million, it’s from 10,000 people, not from one individual, so it means that we’ve got access to almost a US asset class of money.
     And how will the banks respond? We’ll wait and see. Some of them are doing partnerships, but in general I don’t think they really see us as a threat. I think they’re kind of like: “Brilliant, you’ve addressed that market we don’t want anyway because there’s not enough money in it, and we can say that we’re not discouraging competition, hurrah.”

Q: So what is the utopia if you had the click your fingers, the dream vision for Trillion Fund in two, five, 10 years? What would it be?
JG: So Trillion began as a business focused on renewable energy. We recently merged with Buzzbank, which was the UK’s biggest social crowd funding platform. We’re just sitting so far with 14,000 members, so still quite cute and adorable at this stage. Raised about two and a half, £3 million.
   What we see happening in 2015 is just a very rapid expansion leading up to the ISAs at the tail end of the year in secondary market, and off it goes.
    The absolute utopia for me is that as many people as possible feel like their money is doing what they want it to do, that they can see where it is, that they’re happy with how it’s being used by other people, that they’re getting a very fair share of the return, and that we’re all kind of just a bit more engaged and involved and doing things together.
It’s about a wee balance of power between individuals and institutions. That’s all. Competition is a very, very good and essential thing.
    So I’m expecting many more crowd funding businesses to emerge, others to consolidate, some to fold — it’s happening already, but really what we’re talking about is a democratisation of finance, and that is very exciting in terms of getting those five and a half million people, getting that 1.12 trillion and putting it to work, boosting the economy and boosting returns for us all.
    And in my case, once I know I’ve got my 7%, I’m all over the social benefits. I just think we have to start with the returns first of all and then think about measuring and tracking the social impacts as well.

A video of the full interview with Julia Groves is available online.


 

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Energy infrastructure  •  Green building  •  Policy, investment and markets  •  Solar electricity  •  Wind power

 

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