Risks of our community energy investments

What are the key risks?

It is important that you’ve read and understood the key risks involved before making an investment in a community benefit society.

1. Your capital is at risk and returns are not guaranteed

• If the community benefit society you are investing in fails, there is a risk that you could lose some or all of your money.
• This is not a savings account. If the community benefit society that you are lending money to doesn’t pay you back as agreed, you could earn less money than expected. A higher advertised rate of return means a higher risk of losing your money. If it looks too good to be true, it probably is.
• Some investments may be secured against assets of the community benefit society, however security does not guarantee repayment.
• These investments are sometimes held in an Innovative Finance ISA (IFISA). An IFISA does not reduce the risk of the investment or protect you from losses, so you can still lose all your money. It only means that any potential gains from your investment will be tax free.

2. This is a fixed term investment

• Our community benefit society investments are long term. You may not be able to get your money back early so you should be prepared to hold the investment until it ends.
• The interest rate on each investment is fixed for the life of the investment. If market interest rates rise, you could miss out on a higher interest rate available on other investments.
• Some investments will automatically roll over and continue at the maturity date, unless you actively choose to receive your repayment.

3. If you try to sell your investment, you might not get back all of your money

• You can look to sell your investment through the Abundance marketplace, but there is no guarantee you will be able to sell, or find a buyer at the price at which you are willing to sell.
• The interest rates available on other financial products may go up and down over the term of your investment. This may affect the price another investor would be willing to pay and if interest rates rise, you may not get back all of the money you invested if you need to sell.

4. Don’t put all your eggs in one basket

• Putting all your money into a single community benefit society, or a single investment category, is risky. Spreading your money across different investments makes you less dependent on any one to do well.
• A good rule of thumb is not to invest more than 10% of your money in higher risk investments. More information can be found here.

5. Abundance could fail

• If Abundance were to go out of business the administration of your investment could be disrupted and you may be prevented from selling your investment. It could take years to get your money back, or you may not get it back at all. We have plans in place to prevent this, but they may not work in a disorderly failure.

6. You are unlikely to be protected if something goes wrong

• Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here.
• Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA regulated firm, FOS may be able to consider it. Learn more about FOS protection here.