Green crowdfunding, what is it and why it is a useful tool to boost the green economy

Elizabeth Smith

Crowdfunding is an alternative financial tool that is applied particularly to companies (startups or SMEs) and innovative projects in various sectors, among which one of the most cutting-edge is the green economy.

Hence the recent emergence of the term “green crowdfunding,” for all those crowdfunding operations that have as their object and goal the production of clean energy or otherwise environmentally sustainable projects.

What is meant by green crowdfunding

Companies that want to increase their energy efficiency or install new technologies to use clean energy, to be more sustainable or bring themselves up to speed with legislation, often struggle to access traditional sources of financing.

These projects are often very expensive and cannot be done on their own. Green crowdfunding is a way to quickly raise the capital needed to support the energy transition. Which is an increasingly urgent need for the planet.

It is also a very profitable investment opportunity. So it brings benefits for everyone: for investors, for companies, for the environment.

Climate change is one of the most pressing issues – perhaps the most pressing ever – at the global level. Major political and economic powers are committing themselves to taking action to address it. Particularly, by promoting energy transition and a shift away from fossil sources of energy.

Companies must therefore adapt to new legislation on the subject. And, institutions must find solutions to transform societies and the habits of individuals in this direction. It is precisely from individuals that support for this process can come, which is even more concrete than small daily virtuous actions and which also guarantees an economic return.

Read also: Green bonds: what they are and how do they work

Equity and lending crowdfunding in the green sector: how and why

Green crowdfunding allows even non-professional investors to invest in green projects from small amounts. Including high-yield and low- or moderate-risk financial products in their portfolios. The renewable energy sector is booming and will necessarily be so for many years to come. So, it guarantees stability and higher returns than the current financial market average. Plus, it is independent of the economic cycle trend.

Authorized platforms allow access to selected and verified projects, get directly in touch with the proposing companies, find out all the details, and decide how much and what to invest in, quickly and easily, eliminating red tape.

This is how, for example, a project like Green Energy Sharing achieved its goal. The desirability and ease of access of green crowdfunding for investors, then, means that companies can reach out to a wide range of people. And, one contribution at a time, it raises the necessary economic resources in a much shorter time than traditional avenues.

Equity crowdfunding and lending crowdfunding

The ways in which green crowdfunding is carried out are the same as the other sectors to which this alternative form of financing applies. Mainly equity crowdfunding and lending crowdfunding.

The former consists of buying real shares in the company seeking funding for its ideas. Thus participating in the distribution of the profits generated by the project once it is realized.

The latter, on the other hand, is a form of collective lending. Whereby one lends money to the subject of the crowdfunding campaign and receives it back with a predetermined interest.

In Europe, these participatory models for developing green projects are already widespread, especially in the area of photovoltaics.

Read also: All about GreenVesting: the best opportunities for investing in the green economy

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