For an updated view of this post, please go to Quality Abundance – The Ethical Impact Investor.
Please note: This is a user review based on a combination of their Swedish site, using Google Translate and their International site. I am documenting my experience investing through Better Globe (Referral Link) as an alternative ethical investment. This is not advice, as your circumstances are different, but may add to your thinking. This is an honest review, but biased, as I only review products I like and after doing the review, I have signed up as an ambassador.
There is a growing breed of investors who are more ethically focused, but get frustrated by lower returns and limited options. I wanted to find out if investing through Better Globe would offer a decent return, given the risk, while meeting my ethical investment criteria. In short, giving a 10%-15% Euro denominated return, while investing in poverty and climate change reduction, I’d say, it certainly does.
The best time to plant for growth
“The best time to plant a tree was 20 years ago. The second best time is now.” – Chinese Proverb.
In 2001, I did a gap year around the world, my travels took me through New Zealand, where I met a farmer, he was in his late 20s. During one conversation, he pointed to the bottom end of his farm and said, “I’ve planted some trees there, the land wasn’t suitable for what I farm. That is part of my retirement package. In today’s money, those trees could be worth $250,000 in 20 years time.”
I thought about it and loved the idea, it was long term, inflation adjusted, virtually guaranteed growth, had great tax incentives, while not diversified itself, it would complement his other planning. It was certainly a great addition to a long term pension plan.
Although I loved the idea, I had no practical way to implement it myself. That was, until I was introduced to Better Globe.
Who are Better Globe
Better Globe are a Norwegian based market driven charity or perhaps more accurately, a for purpose company. They give the tools for people to work themselves out of poverty in a long term, profitable and self-sufficient manner. In order to meet it’s purpose, it has set up as a business, similar to the growing numbers of B Corps.
They operate in semi-arid areas, helping plant trees with a dual benefit approach, firstly it provides an income and long term assets to communities, secondly, it works as a carbon capture mechanism, reducing the impact of global warming. Better Globe supports the planting of specific trees that were once growing naturally in the area and suitable for the industry.
The benefits of planting and replacing trees chopped down for firewood and exportation should not be underestimated. Trees enable rain and life with their shade and temperature differentiation, the source of life is shade, not direct light.
The website – Charity, not investment
The international website perhaps needs a refresh, so I headed over to the Swedish version and leveraged Google Translate which is pretty accurate (usually) these days. The website is set up to “sell” donations more like a charity, rather than sell impact investments (like Kiva or Trine), it focuses on the story and methods, rather than the return.
I wonder if re-branding it to an ethical impact investment package would drive more investors. Given the potential returns on offer, it has a compelling case. While the website tells a great (perhaps a little long story), from an investor perspective, changing it to start with a simpler version may be better. The numbers and returns are available, but they require a bit of a deep dive.
A starting point would be to make the products page the home page. Although this may drive away the more charitable giver to something like Cool Earth, so I guess it’s about deciding what is better for the potential giver or investor.
The current offering
The donation package is Eur 53:
- 2 trees bought (4 planted, as a backup)
- 2 donated to the community
- Eur 1.50 donated to local micro-loan/financing for businesses to help stimulate the supporting economy
- Eur 1.50 school infrastructure (through Child Africa)
- 500ltrs of water
- and training.
The purchase option is Eur 17:
- 1 tree (2 planted)
For both, tax is as per the country you are tax residence in. With the potential for a tax write off within the donation offering. The purchase is not for a specific tree, so it somewhat diversified geographically across Africa.
As there is a global market for trees, Better Globe’s success is not dependent on a single currency or market. The investors returns are in the relatively stable Euro, which may be attractive to those who want Euro exposure.
Expected returns are pretty set (as it operates as a loan) – based on some quick and simplified maths (available here – which could be out), investing at the beginning of the first year and not touching it gives you:
- ~10.1% simple annualised return (Around ~12% if dividends are reinvested at the same rate)
- Eur 5.10 or 10.4% annual dividends start after 5yrs
- Eur 340 or 10x purchase price is paid after 20 yrs
- Eur 53 over 20 years grows to:
- Eur 363 (without reinvestment of dividends)
- Add Eur 163 (with reinvestment, assuming same rate, there is a mention of a discounted purchase price of Eur 1 per tree, so potentially higher, but I didn’t factor that in)
- Potential to claim a charity tax deduction of Eur 19 increasing the effective return.
- ~12.87% on a simple annualised return (~15% if dividends are reinvested – I read somewhere (translated from Swedish) of a return of 14%, but I think this did not use T0 for the negative cash flow and included return of capital on the return and no reinvestment of divdends).
- Eur 2.55 or 15% annual dividends start after 5yrs
- Eur 170 or 10x purchase price is paid after 20 yrs
- Eur 17 over 20 years grows to:
- Eur 191 (without reinvestment of dividends)
- Add Eur 102 (with reinvestment, assuming same rate, there is a mention of a discounted purchase price, so potentially higher)
According to Johan, a Better Globe Ambassador:
“The most beneficial way to be a Better Globe customer is to regularly buy one donation package and 10 trees each month. If you do that 12 times a year or otherwise make sure you have purchased 12 donation packages and 120 trees before the end of the year, you will receive 20 bonus trees. Then you get the most value for your money, since you only pay €16.31 per tree while you get the same return from each tree, i.e. €208.25.”
My thoughts on it as an investment
The returns are higher than I have typically seen elsewhere, specifically denominated in Euro. The money is mostly locked in for at least 5yrs until the dividend stream starts, then the main return is after 20yrs. Being locked in is great for discipline. It is reliant on Better Globe to continue to operate as it does, I imagine if it closed, the loan would still be payable, but it may be subservient to other creditors. This is potentially a great compliment to a wealth strategy, while having a positive impact on reducing poverty, limiting climate change and reversing soil degradation due to farming and deforestation.
It is not as tax efficient as I would like, as it is not being offered within a tax friendly wrapper (such as a SIPP or ISA in the UK), although a dividend payment may be beneficial to some and the returns are probably high enough to accept the tax hit.
With some tweaks the Innovative Finance ISA Wrapper (P2P) in the UK could potentially work (although it might be restricted to UK loans, I’m not sure), perhaps partnering with someone like Abundance Investments is another alternative. I certainly think they could look at partnering with Ecosia – the search engine that plants trees, as a source of funding. Ultimately it would depend on the level of capital they could efficiently and effectively allocate to worthwhile projects.
Potentially a great gift/investment for:
- New born/toddler – they probably have boxes of toys already and could help them starting out in the Working World
- Graduate gift – it demonstrates the importance and value of long term thinking with investments
- Wedding gift – may mature as the kids are leaving for University
- Pension adverse – People who are ignoring or want to compliment their pension
- People who have enough stuff – They are difficult to buy for and would actually be happier with less stuff (I do an annual de-clutter in my life, typically towards the end of the year).
- Early retiree, say 55 yrs old.
- Dividends from 60
- Payout at 75
An affiliate/ambassador option
There is also an option to become an affiliate, by purchasing 10 trees annually and a signing up for a monthly donation package, as well as the magazine and a small management charge, coming to Eur 800 annually, Eur 323 in December and Eur 53 per month. Which gives the normal return and various other incentives, which I have now signed up for.
Hidden in a great story, is a great investment opportunity, that will meet the criteria of many people who are looking to complement their existing wealth strategy, with flexible investing options (what, when and how much, ability to stop), returns of 10%-15% over a 20 year period in Euro.
For me personally, I will be looking at Better Globe as an great option for non-consumerist giving, as well as an addition to my growing ethical impact investment portfolio.
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