Anyone who wants to invest with a clear conscience is often lost. But there are alternatives to supposedly green ETFs: direct investments in sustainable projects in Africa. But they are not without risk either, admits Marylin Heib in ntv's "Climate Laboratory". "In the beginning, 10 percent of the projects that we financed went bankrupt," says the managing director of the green investment platform Bettervest - in many cases the investors' money was lost as a result. There should be no more such failures in the future: Heib promises more security, among other things, through new control mechanisms and failure insurance. The problems do not seem to have hurt demand: According to their own statements, offers such as Bettervest are growing and are finding more and more good entrepreneurs who offer solar systems or resource-saving stoves for countries in Africa or Southeast Asia. Important, says Heib. "These projects hardly have any other chance of getting money."
ntv.de: At Bettervest I can invest in different climate projects, earn money and do good for the environment. They offer solar projects, resource-saving cooking stoves - and recently failure insurance. Why?
Marylin Heib: You can protect your investment with default insurance. If there is a problem with a project, the failure is insured. This is fairly new in the crowdfunding industry. We are happy to be able to offer this soon.
That doesn't sound particularly trustworthy. They are courting investment in projects in Africa and their best argument is that they now offer default insurance to secure that investment.
It looks like this now (laughs). But if you have been investing in crowdfunding projects of this kind for a long time or generally use direct investments, you know that something can always go wrong. Not often, it affects maybe five percent of the projects. But it is simply important to the citizens that they get their investment back. In 2019 we conducted a survey: Dear investors, what would it take for you to invest even more? Contingency insurance was at the top of the list. That's why we made an effort. Now they exist.
And how does this default insurance work? Who pays it?
There are different providers. It is often large institutions such as KfW or the African Guarantee Fund: Institutional organizations that are funded by development aid ministries, among others. They are very interested in funds flowing into developing countries. Therefore, they offer cancellation insurance. But all of this costs money. So if we offer insurance for one of our projects, a fee has to be paid. That reduces interest for the crowd, but the overall package is still interesting.
Do you have a specific project as an example? If I invest with default insurance, I get a little less interest, but in case of doubt, all my money back?
The insurer looks at the project and says: I think that's good, I'll insure it. The first will be resource-saving cooking stoves in Kenya. The crowd should have actually received an interest rate of 7 percent for this. Due to the default insurance, it is only 6 percent. In Kenya, these stoves are manufactured by the Burn company. This generates green certificates. The goods as well as part of the certificates are pledged for the project to secure it. If there was a problem and the company went bankrupt, this collateral would be liquidated.
However, if this collateral only covers 60 percent of the sum - i.e. you would have lent 1 million euros, but would only get 600,000 euros back - the remaining 400,000 euros would be covered by this default insurance. You can do it differently, cover 100 percent of the sum or just 25 percent. Usually it's 50 percent, because otherwise it's too expensive.
So you can still lose money despite default insurance?
However, a return of 6 or even 7 percent sounds very lucrative. This is almost the historical return of the DAX. How can resource-saving stoves in Kenya generate the same returns as billion-dollar companies?
We check the projects and look at the cash flow plans, i.e. the income and the costs. When it comes to stoves, the manufacturers generate green certificates. For each device they get one that they can sell on the market.
What's so great about the stoves?
Many families in Africa still go into the forest, fetch wood and prepare their food on an open fire. With the resource-saving cooking stoves, you can put wood in at the bottom and put the pot on top. So the family can cook just as they are used to. However, the hearth is no longer really open, but enclosed in the cooking stove. This is much more energy efficient.
You need less wood?
80 percent less, exactly. In addition, the exhaust gases are collected in the cooker and are no longer distributed in the house. Ultimately, the combustion process is more controlled and fewer pollutants are produced. But it's not just climate protection, the social effects of cooking stoves are also highly regarded. Because for the open fireplaces you have to collect huge amounts of wood every day. Mostly women do this.
And that's what the green certificate is for?
All products that save CO2 can be certified according to certain standards and generate green certificates. This is regulated internationally. Depending on how many tons of CO2 the product saves, the more certificates I receive. These certificates are traded on the open market. Companies that want or need to do something to reduce their carbon footprint can buy them. Chemical companies for example.
This is how Tesla used to make a lot of money.
Exactly. If you have a standard product, it is particularly easy because the product only has to be certified once. Even if I make thousands or millions of these devices afterwards, I keep getting a new certificate. The cooking stoves are standard products, so it works very well. The certificate price is also very high at the moment. Stove manufacturers like Burn in Kenya generate good income through sales. This is the main source of income for the repayment of the loans.
And Bettervest gets a referral fee?
Our task is to find and check the projects. Are they financially stable enough to be able to repay the loans? Do they benefit the climate and do they make the social contribution that we want? Then we put these projects on our website for crowd investors, whose trust we have earned over many years. We are also always looking for new investors, which also costs money. All of this is financed by a one-time commission that we receive when the project is paid for.
What is your success rate after ten years?
There are two times of Bettervest: the time before our restructuring and the time after. This may also explain why we created this failure guarantee.
It sounds like the first phase didn't go so well.
Yes. We've been on the market for so long that we've also had bad experiences. Even if you believe the project owner, a lot can happen in these countries: there is political unrest or the currency suddenly plummets. As a result, initially 10 percent of the projects we financed went bankrupt. In 2018 we completely restructured, changing the team and the process of how we review projects. Above all, however, we have built in structures to better secure these projects. We no longer support companies that do not provide this security. Since then there has been no more bankruptcy.
What went wrong with the companies that went bankrupt?
Mainly it was lack of management experience. The companies meant well, they wanted to make a difference, but they didn't know what could go wrong in an African country. We had an entrepreneur from Austria. He set up a briquette factory in Ethiopia with a local partner, which we financed. A great project, but then they fell out and the Austrian entrepreneur didn't come to the hall anymore. Even in court he could not enforce that he comes back to the machines. These are things that can happen.
Actually, that shouldn't happen, right. This is a lack of foresight to create security. The hall belonged to the local shareholder. An experienced management might have rented them from an official partner or structured the project completely differently.
Is this the cause of some angry reviews on Google? There are 2 out of 5 stars or even only one because several projects have gone bankrupt and the money is gone.
That is the reason for this restructuring. These investors invested before 2018. We're sorry, but we can't change the past. We are now one of the strictest platforms in Germany.
But you can still lose money on these investments. Default insurance does not cover all losses. That cannot happen with the DAX ETF.
I would never say that you should invest all your savings in our projects. These direct investments are part of a financial portfolio that pays attractive interest every year. You shouldn't invest all of your money in stocks. If the DAX and the stock market crash, you have to wait ten years for prices to recover. You don't get anything from that either.
How do you check whether the projects are working? Let's take the stoves: how do I, as an investor, know that they are being manufactured, delivered and used?
There are now good control bodies, the German legislator has done a lot. All projects must be supervised by a use of funds controller.
A typical German one, yes (laughs). I have one more thing: asset information sheet, the VIB. It states exactly what the companies bought and for what amount. Before the project owner receives the money we have collected, the use of funds controller checks the data in the VIB - for example, whether there are invoices for the products purchased. It really needs to be proven that this money is being used as promised.
And how do I know that these cooking stoves are also used?
This is in the company's own interest. If they pay for the stoves, they also want to sell them and make money. Otherwise they'll ruin their business. However, there is also semi-annual reporting. In it, the project owners inform all investors about the financial situation of the company and what is happening at the moment. You get pictures and data on how many stoves were distributed.
Assuming everything works. That makes Bettervest a viable way to direct money to where it's needed while still generating returns. How big is this lever? How much can you change with such projects?
The lever is insanely big. Because when you find companies that you can trust and give money to, they create jobs and income for the people who live there in their region. Every euro invested there can achieve ten times more than here because it goes directly to the people on site. The difficult thing is to find these companies.
So the bottleneck is not a lack of investors, but projects that you can give the money to?
That always fluctuates. During the Corona pandemic, for example, we had many more projects than Crowd because people were afraid and didn't want to invest any money. Things are better now, but concerns about the financial and energy crises have been growing since August. But companies like us are growing and finding more and more good projects to invest in. A colleague, for example, has been in Kenya for several months and is getting an idea of what's going on there. There are more and more well-trained entrepreneurs. Now we need people again who say: These are important projects, stable companies, I would like to give my money to them for a nice return.
Do large investors also invest with you, or are they more of a private individual?
We have a mixture, whereby the majority are really normal citizens who simply want to invest their money wisely. You can do that with us from 50 euros. The threshold is very low. There are also individual investors who have invested sums of 200,000 to 400,000 euros over the years. However, our tickets are too small for institutional investors. They only invest from two or three million euros upwards. Our projects tend to be between 200,000 and three million euros. That is why it is so important that these companies are supported, because they hardly have any other chance of getting money.
How many people invest with you? Where do you want to go?
Currently 6000 people have already invested in Bettervest. This year we are at a total of four to five million euros. In 2027 we want to achieve a funding volume of 20 million euros. That would be growth of 30 to 50 percent every year.
Clara Pfeffer and Christian Herrmann spoke to Marylin Heib. The conversation has been shortened and smoothed for better understanding.