Lisa Ashford, CEO, Ethex
It's time for another extended interview - and today we're meeting Lisa Ashford, the CEO of Ethex, a leading UK platform for ethical investment opportunities.
Over to you Lisa - my questions are in bold.
Who are you and what's your background?
I did a Master's in environmental technology, but specialised in energy policy. This was at the time the energy markets in the UK were just starting to deregulate. So I joined a company called OM, which is now part of Nasdaq (Nasdaq OMX), to be an analyst for them looking at what was happening in the UK energy market and how they could potentially play a part in the deregulated market. We set up the first 24/7 electronically traded marketplace in the world for UK Power and I helped with the project management of that, and then went on to be Operations Manager. It was quite an intense baptism of fire in many respects. I stayed with OM for quite a number of years and learned a lot. Through that I got into carbon markets. I spent a number of years in carbon markets creating interesting financial deals to help deliver clean energy in developing countries, working with a lot of banks, a lot of utilities, which was super interesting.
I then found myself at a natural turning point. I won a scholarship to study financial strategy at Said Business School. It was like an MBA, but although I'd been in financial services I was quite different from a lot of the other executive candidates on the course. It was during that year that I, and quite a few of us, started questioning the market and traditional financial services and how inefficient they are. I became intensely curious about how finance could be used to create positive social and environmental impact. I took my knowledge from the energy and carbon markets and wanted to apply that in financial services. And then I found Ethex, which literally had just launched. I got in touch with the founder and offered to help out and he bit my hand off. So I've been CEO of Ethex for over 10 years now.
Did your course light up the not for profit concept in you, or were you already harbouring those thoughts?
I think I probably always had that. When I was at Imperial I actually spent quite a bit of time in Zambia looking at how energy service companies might be used as a model to accelerate energy access in rural areas. That was really interesting to me. We looked at how could you set up a company, how could you structure it, how could it work to serve this impact but also be financially viable? And that has now come full circle with my involvement in Energise Africa, Ethex’s sister company.
But what the course did was to provide a great network, it opened up opportunities I wasn't expecting, and gave us great tools to look at the financial services sector. I realised that it's just so old school and some of the case studies we were working on were just crazy in terms of how companies went through the IPO process and the pricing they were getting and all the cuts for the intermediaries.
I’m fascinated by the sliding doors aspect of you discovering Ethex, how did that happen?
It was an Oxford connection. Ethex is based in Oxford, Said is in Oxford and I'm based just outside of Oxford. I was looking around to see what was new and interesting and, as you know, Oxford is a bit of a hotbed for startups. So it was a bit of luck and a bit of proactivity.
So, 10 years in, what is your job title and what are your general responsibilities?
I’m CEO of Ethex. We are a small team of less than 15 and so it's quite a hands on role. I establish the strategy for the organisation, deliver on the strategy and fundraise. And there's quite a lot of business development in there as well. As I mentioned, because running one company isn't enough, we decided to launch another one and we have Energise Africa as our sister organisation. As a small organisation, we're punching above our weight and delivering quite a lot of impact.
Can you give us an overview of Ethex?
Ethex is a direct impact investing platform. We enable individuals to align their money with their morals and invest directly into purposeful organisations. Our mission is to shift the investment paradigm so money is a force for good. We have three themes which are: action on climate change; creating a fairer society; and helping to build more resilient communities. In essence our investors, who are everyday people, are investing and funding grassroots organisations with solutions to those societal challenges. We make it really easy to understand and easy to do, we avoid financial jargon and make it straightforward and transparent. We see ourselves as a very ethical business.
What’s the origin story? Why was the company started? To solve what problems?
Ethex, from ethical exchange, was to be an online platform for unlisted, ethical companies to have a place where their shares could be traded. However, quite soon after launch organisations who wanted to raise primary finance started approaching us and saying, for example, “We want to build a solar community solar project in Somerset, can you help us do that?” And we saw what interesting opportunities they were and it blossomed from there. We grew quite quickly, word got round, and we had a lot of referral based growth and built up a core base of ethical investors who were looking for something and couldn't find it. We're providing something that they really couldn't access elsewhere.
When you say referral, is that from the traditional incumbent financial services or the investors? How do people find you?
All angles, actually. Some referrals come from the businesses themselves, because they are rooted in their communities and it becomes more of a crowdfunding model, with investors telling other investors. While some of the ethical, independent financial advisors find it too difficult to recommend or promote unlisted investments.
Why is that?
It's another one of those system based things. It's really hard to cope with non-standard products for wealth or fund managers. One reason is education. What does it mean to be ethical? What is this new product? Who are the people running the project? If it's not a big FMCG, then I'm not going to promote it. And another is risk, it is perceived to be high risk. I think the market isn't set up in a positive way at the moment for retail investors to make empowered decisions about their money.
How do you define retail investors?
We have quite an open policy. The minimum to invest is £50, so it's really quite small. We have a big mixture of investors in terms of age, gender, wealth etc. We have some heavy hitters who invest multiple times at £10,000 plus and we have small investors who invest £50 or £100. It's across the board. And we aim to provide something that works for everyone.
And what about the investments, is it just crowdfunding, or debt funding as well?
It is investment crowdfunding, but not necessarily in the traditional start-up sense. We have a combination of organisations, some who are new, but others that have done multiple projects, such as renewable energy or affordable housing projects. Whatever it is, we aim to provide patient, long term, flexible finance for them.
What’s your approach to non-performing projects?
We have got the statistics on our website. We do make that transparent, and we have a very low number of failures. There are occasionally organisations that don't make it for a variety of reasons, obviously, but is it high risk in the same way as crypto? No!
It's for people who are quite comfortable being self-directive about their money, because you've got to understand what you're doing, and you've got to make choices.
And what about big investors, do you have family trusts, or high-net-worth individuals who care about the investment, but might care more about the story or the feel-good factor?
We do have some family trusts who invest. And we do have some IFAs who have ultra high net worth investors who have built portfolios. However, for some of the wealth managers it's just not on their radar because it's not within their current systems. That is a challenge for us.
We have got a new Group Head of Marketing and she talks about the ‘dinner party conversation’. Investing in these projects and the stories they give is so much more interesting than the boring money conversations.
There's a group called Practical Acts and they are trying to figure out how to create a ‘How To’ guide for people who want to be more intentional with their money. Historically they would have a philanthropy bucket for donations and charities, and an investment bucket looked after by traditional wealth managers, and never the twain shall meet. We need to start to pull those together and have the conversations that say, you don't need to donate, you can invest and actually use the returns to create even more impact, so it's perpetual.
I love this. I was part of the Sustainability Committee with my colleagues at Nordea bank and we created the first green bond in that region. What works so well is making people feel good about the investments.
Back to the profile questions, who are your target customers? What’s your revenue model? How are you funded?
We are an unusual organisation for a financial services organisation, because we are a not-for-profit, however, we still need funding to be able to do what we do and develop the business. We have a number of backers, and we've just completed another funding round (read full release here):
Ethex, the UK’s leading positive impact investment platform, has secured £0.5m in funding from an impact investment consortium (‘the Consortium’) to expand Ethex’s mission of enabling people to align their money with their values, while driving meaningful change across UK communities, the economy, and the environment.
The Consortium comprises forward-thinking organisations united by a shared vision of democratising finance and supporting the UK’s transition to a more regenerative and inclusive economy. Members include CO2Sense and the Joseph Rowntree Foundation (JRF), alongside reinvestment from long-standing Ethex backer Friends Provident Foundation. Ethex also benefits from the continued endorsement of its founding investors, including Barrow Cadbury Trust, Better Society Capital, and Esmée Fairbairn Foundation.
Ethex has mobilised over 29,000 positive investors to raise over £120 million to back more than 200 pioneering projects that have created a positive impact.
Our revenue model is very simple. The organisations that are profiled on our curated platform, pay a fee for the funding that they receive. If someone's raising half a million pounds to build a solar project, then we take a percentage commission on that for the due diligence work that we do, introducing them to our investors and a service fee for post investment management.
If you had a magic wand, what one thing would you change in the banking and/or FinTech sector?
Firstly, I don't think it's a very favourable marketplace at the moment for retail investors. It's quite hard for them to access the products and services they want and it's still quite closed and archaic in some ways. This means there are a number of people who are excluded from financial services. It might be because of lack of education in financial literacy, or the financial service organisations and products being really old school. It's really hard to understand and therefore really hard to access. There is also a lack of access to affordable credit. That may be individuals who are excluded from the system because they've missed a payment in the past or had a county court judgment, or people who need credit to buy white goods and they haven't got a very good credit history. There are a lot of people excluded from financial services for not necessarily the right reasons.
That must be true for some of the community group investment opportunities you see - they can just about get a bank account, but nothing else.
Absolutely! Solar for Schools is a great example, one which we've raised millions of pounds for. The model is that they're putting solar systems on the roof of schools so that the schools don't have to provide the upfront investment to do so. It provides more affordable electricity for the school and amazing education benefits for all the kids getting involved and understanding what renewable energy is, etc. But could they get the money from the bank to do what they wanted to do? Of course they couldn't. We've raised a lot of money for them and they're thriving now and on the basis of their track record they’ve been able to access debt from one of the ethical banks to help them to do more. So that's a really good example.
What is your message for the larger players in the Financial Services marketplace?
It's the same thing. Opaque, complicated products are not what people want. They're demanding more from their money and we should be empowering them to make better choices.
I think this should be integrated into the high street banks’ apps - an ethical investment button!
Where do you get your Financial Services/FinTech industry news from?
I get a lot of info from LinkedIn, from my peers and wider groups I follow. I’ve got tags and alerts for that, as well as from the usual suspects, FT, Times, Guardian.
Can you list 3 people you rate from the FinTech and/or Financial Services sector that we should be following on LinkedIn, and why?
- Nina Mohanty, who is leading a FinTech called Bloom Money. She's a young mover and groover, and she's basically using the concept of cultural lending circles and trying to bring that to FinTech, which is super interesting.
- Jamie Broderick, who is ex-JP Morgan. He is a great person, and is pretty prolific in his posts around social investment and how that interplays with FinTech, or VCs and traditional financial services. He gets to play the devil's advocate and he's a super interesting guy.
- Patricia Hamzahee, she’s a leading member of a group I’m part of called Women in Social Finance. She's a great woman who is really spearheading bringing diversity into our sector and increasing access to finance for underrepresented entrepreneurs. She's really good at calling people out.
What FinTech services (and/or apps) do you personally use?
I use PensionBee, which is a great example of trying to make financial services easy, when you've got loads of paper based old pensions, which don't really tell you anything. I use Atom bank. And obviously I use Ethex and Energise Africa.
What’s the best new FinTech product or service you’ve seen recently?
I've got something which is related to some of the stuff I was talking about earlier, about access to financial services and affordable credit. We currently list an organisation called Salad Money and have done several successful raises for them. It's basically an affordable lending platform, or borrowing platform. They are using open banking and are a CDFI - a community development finance institution, which means that they'll be able to much better make decisions about who can and can't borrow money because of the activity on the account, rather than what their credit score is. There are so many people who are on low wages, possibly NHS workers, that might have missed a payment on something and have got a poor credit score, so now they just can't access affordable credit. I think it’s really exciting.
Finally, let's talk predictions. What trends do you think are going to define the next few years in the FinTech sector?
In our world, it’s open banking that has got transformative potential, because so much of back office services are antiquated. The potential to revolutionise transaction costs, have real-time decision making and simplicity of transactions is potentially limitless, isn't it? I'm really excited to see where that will go and how it will help us others.
The other thing which is super interesting is more decentralised finance. I’m interested in how that plays with what we're doing and creating more fractional, democratised finance. It's obviously a very interrelated theme for us.
Fantastic! Thank you so much Lisa.
You can read more about Lisa Ashford on LinkedIn and find out more about her company Ethex at http://www.ethex.org.uk.