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Social impact of green crowdfunding

Contributed by: EEIG

Researchers have measured the effectiveness of crowdfunding for renewable energy projects in terms of human and environmental wellbeing
Social impact of green crowdfunding
There is growing interest in crowdfunding as an alternative way to support projects focused on renewables. This comes at a time when the green energy sector is feeling the purse strings tighten in many European countries.
“National governments in the EU are alleged to have created a booming cycle by initially granting strong support for renewables then rapidly rowing back as they feared excessive expenses for subsidies and an increase in the price of electricity for industry”, points out a recent study by researchers from the Politecnico di Milano School of Management, the Università Bocconi, Milan, Italy and the Ton Duc Thang University, Ho Chi Minh City, Vietnam.
In the paper, titled “Crowdfunding for green projects in Europe: success factors and effects on the local environmental performance and wellbeing”, they analysed the key factors that made a wide sample of crowdfunding campaigns through specialised platforms successful. Moreover, “to our knowledge we are the first to document the positive effect of crowdfunding” on “environmental performance and wellbeing at the local level”, they claim. met one of the authors, Giancarlo Giudici, associate professor of corporate finance at Politecnico di Milano.
Crowdfunding and renewable energy. Why does this relationship seem to work?
Through crowdfunding, sponsors of green energy projects are able to involve local communities in the ownership and financing, raising awareness about sustainability. In crowdfunding, pledgers are typically motivated by both financial objectives (i.e. making money) but also by intrinsic objectives (i.e. helping reduce carbon emissions and pollution).

What are the main factors that are boosting the use of this alternative source of funding?
Investments in green energy are struggling in developed countries. Many countries like Italy have already reached the 2020 Kyoto objectives, and governments are reducing feed-in tariffs and incentives, this is hampering investments from institutional investors and funds.

Which countries pioneered crowdfunding to finance renewables and which the ones are emerging in this sector?
Green crowdfunding portals appeared in the 2000s in the US, UK and Nordic countries, where there is widespread sensitivity to environmental topics. We expect that they will now rise in developing countries like China (and in the Far East), in Africa and South America where large-scale projects are now being implemented in the hydroelectricity sector, in photovoltaics and wind turbines. But in the future we expect investments also in small-scale projects which can also be financed through crowdfunding.
In developing countries energy is lacking in many regions, especially rural villages. Green crowdfunding can make the difference and bring energy in order to increase wellbeing and stimulate entrepreneurship.

Could you describe the typical investor in green crowdfunding? And why do women usually represent a very small share as highlighted, for example, in a report recently published under the EU project CrowdFundRES?
Investors are typically aged between 40 and 50, with women being less likely to be investors. Several studies show that women are more conservative in selecting financial investments. Crowdinvesting is more risky compared to the subscription of bonds and securities listed on stock exchanges, and this can explain why men are major contributors.

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crowdfunding, renewables, wellbeing, environment
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