Community Shares, Energy and Direct Public Offerings

Enterprises serving a community purpose can raise investment through the sale of shares or bonds. Unlike charitable fundraising, community investors can get their money back, and may receive interest or dividends on the money they invest. Although it is not a new idea (community investment underpinned consumer co-operatives in the nineteenth century) the last ten years has seen a resurgence of interest. 

Community Shares
Community shares are distinguished from from investment by social business angels, which typically involves fewer than 20 investors and from community initiatives using £1 shares as a membership ticket (not as a vehicle for raising investment capital). There are around 100 current examples of community investment initiatives in the UK. In the past decade the combined community investment of the 41 organisations set up is nearly £44m and the combined membership is over 31,500. Most of these organisations are set up as Independent Provident Societies (IPSs) with only eight out of the 41 using an alternative structure. The most popular trade activity among the 41 new initiatives since 1999 is renewable energy, followed by community-owned retail stores and community finance. Community investment has also been used to finance fair trade initiatives, community farms, land and buildings, and even telecommunication services.

The popularity of utilities in this sector rests on the relatively safe and predictable returns on investment. There are now development agencies, specialising in support to communities that want to apply community investment principles to renewable energy schemes – see www.energy4all.co.uk. In the future community investment is likely to finance almost any initiative which is capable of generating a sufficiently attractive financial and social return. Beyond £s, community shares a highly effective way of engaging communities in the work of an organisation. Shares convey membership and ownership, members have defined rights over the organisation, which can include voting rights to elect directors and determine policy.

Community investment is an unfamiliar concept, which can be difficult to explain to people who are more used to fundraising – there is a long tradition of fundraising that has shaped public attitudes to the financing of everything from kidney machines to historic and The Plunkett Foundation has helped to establish nearly 200 community-owned shops, most of which have used voluntary fundraising to raise capital. In comparison only ten community-owned stores have used community investment to raise additional capital. Promoting community investment may also prove difficult because most people have no direct experience of investing in shares or bonds – less than a quarter of the population directly own shares or bonds, and many of those acquired shares through denationalised industries.

However community funding could be entering a golden era. It is becoming increasingly unlikely that all a community’s needs can be met through government spending or charitable sources, and there is a limit on what people can afford to donate to good causes. Community investment enables people to invest in good causes and generate a potential return. The Community Shares programme is investigating new forms of investment that may be more accessible to people on low incomes – the history of the co-operative movement contains examples of people saving small regular amounts of money to provide the capital for what became large community institutions. The concept of community investment appears to be capturing the public imagination as a new way of building community services and infrastructure.


Direct Public Offerings
In some respects the US is ahead of the UK investigating this approach to raising funds, at least for SMEs. A good example would be Drew Field Direct Pubic Offerings and in particular their online book.


Community Energy
Over 60% of the primary energy in fuel is wasted as unwanted heat at power stations. If electricity is generated closer to densely populated areas, this wasted heat can be used to heat buildings through heat networks. This arrangement is called ‘decentralised energy’. More and more private and public developers, local authorities, landowners, building operators and communities are becoming ‘project developers’.

City or town centre locations have more buildings, old and new, with mixed uses, including offices, shops, hotels and public buildings. While there still may be many different building owners, they usually have rational decision-making processes for procuring their energy services. Areas like this can develop large-scale heating and cooling networks served by combined heat and power (CHP) plants).

For non-domestic customers, research indicates this approach to energy will result in a competitive offer in comparison to the next-best offer, typically 10–20% less than ‘business as usual’.