Article

08.08.2016

Green bonds are still somewhat in their infancy

Green bonds are an interesting alternative source of financing. They serve to finance 'green activities'.

Just like classic bonds, green bonds are debt instruments: companies or organisations that need money for investment issue bonds. Examples may include a company that wishes to install windmills, or an organisation that aims to combat environmental pollution in the third world. The only difference between a classic and a green bond is the purpose of the investments. In case of green bonds, the projects are 'green' in some or other sense.

The loans are granted and the bonds are thus purchased by pension funds or insurers, for example. Major institutional investors were initially a little wary about green bonds, but have systematically increased their exposure.

In practice, green bonds are used to finance projects in three main areas:

  • Energy projects with low CO2 emissions, in particular renewable energy, CO2 storage and waste-to-energy projects (in which waste is converted into heat or electricity);
  • Projects involving the energy efficiency of buildings, industry and transport;
  • Projects involving the environment and land use in areas such as agriculture, forestry, waste management and adaptations to climate change.

The terms 'green bond' and 'climate bond' are sometimes used interchangeably. Climate bonds focus on climate-related projects, including projects for the reduction of CO2 emissions.

The term 'social bonds' is also sometimes mentioned in the same breath as 'green bonds'. Social bonds are used to invest in vaccination programmes, education, health, female entrepreneurship, human rights, working conditions and local projects.

The private sector is now also getting involved

Major international financial organisations set the ball rolling in this regard. In 2007, the European Investment Bank issued the first bonds under the name 'Green Bonds'. The World Bank and the International Finance Corporation followed suit.

Private companies have also recently stepped up. In 2013, for example, French EDF granted a loan of EUR 1.4 billion – the first liquid bond in euros from a major company. And, in 2014, GDF-Suez issued EUR 2.4 billion of green bonds.

Interest in green bonds increases

Since the European Investment Bank issued the first green bonds in 2007, the market has grown 55% a year on average. According to estimates of the Climate Bond Initiative (an international advisory body for investors in green bonds), the total issue volume amounted to EUR 35 billion in 2014 and EUR 88 billion in 2015. That seems a lot, but falls well short of the entire bond market, which amounted to around EUR 88,000 billion in 2014.

The Green Bond Principles

'Green bonds' are products that are still somewhat in their infancy. To date, there is still no cast-iron consensus on what a green bond is precisely. The first step towards remedying that situation was taken in 2014 with the introduction of The Green Bond Principles. These are a series of standards for issuers of green bonds. The standards are supported by a group of international banks and are intended to boost the transparency and credibility of the green bonds market.

The Green Bond Principles define the purposes for which the proceeds of a green bond may be used. They also evaluate and select appropriate projects and provide an independent verification. Put simply, they specify the requirements that projects for renewable energy, energy savings, sustainable waste and water management, environmentally-friendly transport, etc. must meet. For the time being, these are voluntary standards. However, in order to make the market truly ethical, there will need to be clear criteria for investment themes.

Article

18.04.2016

Crowdsourcing: the basics

Are you undecided about the various ways of increasing your offering? Has R&D encountered a technical problem? Perhaps your clients know more.

The concept of crowdsourcing is simple: you call for the contribution of your customers and/or the general public. An approach which is gaining popularity worldwide even though it is not actually new. As far back as 1714 crowdsourcing by the British government led to the invention of the chronometer and therefore a reliable method of calculating longitudinal position at sea. 

Three hundred years later the basic principles remain the same: in crowdsourcing you work with a network of individuals and communities within and largely outside the company. They make a contribution in the form of ideas, time, expertise or financial support. This enables new solutions to be accessed and makes realisation of joint projects and optimisation of tasks possible while keeping down costs.

This system is based on exchange, transparency and communication. It also works for all sectors and at all management levels. You should be able to engage a community of designers for your product development for example and choose the best proposal together with the public. Then you will bring it onto the market, possibly even financed via crowdfunding.

The crowd is ready for this

This is certainly no science fiction, as proven by the growing success of the system. It is also the ideal time to get involved with crowdsourcing:

  • communicating with the crowd is easier than ever before thanks to technological development, the social media boom and the development of online communities;
     
  • the crowd is straining at the leash: a joint survey by several European universities showed that 54% of Europeans would like to support projects by companies and private individuals creatively and/or financially;
     
  • co-creation, or developing a project together, is hot. The crowd can join in with a project for a whole host of reasons: the necessity for a creative outlet, commercial motives, dedication to society or just for a sense of honour or fun;
     
  • the economy urgently needs sources of financing and innovative projects in order to achieve new growth and to increase competitiveness.

You too?

It will definitely take some getting used to as such a system radically changes the way in which a company gathers information, carries out research, produces and even finances projects. At the same time relationships with clients or users change as they evolve into potential colleagues, financiers and ambassadors.

But this does not have to be a threat. On the contrary, crowdsourcing provides you with a unique opportunity to relinquish your traditional methods. You can now look externally for ideas, get feedback from the crowd on ideas developed internally or even combine both approaches. The possibilities are endless.

Article

18.04.2016

The dos & don’ts of crowdsourcing

A good crowdsourcing project creates a win-win situation where the initiator and the crowd feel that they are achieving something together. How do you approach that?

In crowdsourcing the 'crowd' component is at least as important as the 'sourcing' component. In order to be successful you must build up this community and win it over. This is where the challenge lies: the crowd is not an anonymous, homogeneous mass but a collection of individuals and sub-groups. You need to seek out and mobilise each one separately. 5 tips for a powerful crowd dynamic:

Take care of the presentation of your project

Your project must appeal. Present it with photos, short films or a clear presentation – vague sketches or a half-baked concept are inadequate. Keep your explanation as simple as possible. After all not every potential funder is a specialist or an engineer.

Also, don't forget to keep your target amount as realistic as possible. Above all do not create the impression that the campaign is an excuse for personal enrichment or that you will channel the money off into other, existing projects. If you work with rewards, ensure that they are original and attractive, divided up into transparent and attainable blocks of financing.  

Build your crowd

Look for the suitable crowd and get these people right behind your project. Approach them via all possible channels and assign them various roles: creative or technical input, critical analysis, ambassadorial, ... When doing so keep the threshold as low as possible, within your company as well. It is recommended that you bring as many of your people as possible into contact with the crowd in order to ensure healthy cross-pollination. 

Live your project

A project without animation has little chance of success. So be motivated and keep motivating others. Respond to queries, take comments into consideration and intervene where necessary. Remember that participants cannot be squeezed to produce viable ideas. They too must go through a creative process in which they can gradually shape their input. So ensure that they continue to be involved. For this purpose it is necessary to approach each sub-group differently: encourage, win over (again), congratulate, permanently challenge, ... 

Keep your campaign exciting

Keep communicating, even if some of the messages may be negative. The greater the involvement you demonstrate, the greater the loyalty of the funders and the greater their willingness to accept delays or problems.

A good dosage is important here. Ensure that news is provided at regular intervals to keep the crowd involved so the attention on your campaign does not fade away. 

Your project, your rules

The principle: you decide where you want to go with your campaign while being open to suggestions from the crowd. So you lead the crowd to the desired end product rather than the other way round. Otherwise the outcome may be rather different to what you had hoped. A few examples of how not to do it are the recent – and hastily cancelled – campaigns which resulted in the product name iSnack 2.0’, a chocolate bar filled with mince, or a washing-up liquid with a scent of roast chicken...

Article

18.04.2016

Crowdfunding: financing with extras

Are you looking to finance a new project which has some risk attached to it? Present your plans to the crowd and discover how quickly small acorns can become mighty oaks.

Crowdfunding or participative financing involves looking for a (large) number of potential moneylenders. These may be professional investors or co-entrepreneurs or equally your clients or the general public. They will finance your project or company on a quid pro quo basis.

This specific form of crowdsourcing is centuries old. Just think about the construction of the Sagrada Família (Gaudi cathedral) in Barcelona or the plinth for the Statue of Liberty in New York. The way in which it happens is rather different today: via online payment or online platforms, often with lots of publicity on social media. The emergence of social media is undoubtedly one of the reasons for the increasing popularity of crowdfunding, together with the search for alternative sources of financing as a result of the crisis.

Much more than just a source of financing

While crowdfunding focused on cultural or humanitarian initiatives for a long time, its emphasis has recently shifted to commercial projects and even the financing of start-ups and small and medium sized companies. The advantages are clear:

  • companies can meet the cost of – mainly innovative – projects which are less suitable for (complete) financing via a bank loan, business angels or a private equity partner. This may be because they have considerable risk attached or demonstrate too little concrete potential for growth, the required amount is too low or the company does not want to have an external party join in with the company capital.
  • Financing is just one part of the story; creating sufficient 'buzz' and a community around your project will make you much more visible. Simultaneously, you carry out market research. Is there a call for your product or service? Is the design suitable? And are you bringing it onto the market in the right way? Thanks to this interaction you can also make adjustments to the product during the design phase, thereby reducing the risk of an unsuccessful launch.
  • By taking the input of the crowd into consideration you will create a much closer bond with your target market, with clients developing into co-designers, fans and ambassadors.
Article

01.07.2016

Challenges and risks associated with crowdfunding

Although crowdfunding provides almost inexhaustible possibilities, it also involves a number of challenges and risks. An overview.

1. For the company

You open the company up to the public. This is of huge benefit in terms of marketing and strategy but it also means that everyone has access to the complete financial situation. You must therefore be prepared to be completely open and sometimes share sensitive information.

This new business model turns all traditional models on their heads. The greatest challenge is learning to deal with this and finding a good balance in the area of

  • control: how do you divide authority between the company and the crowd? There is no golden rule but research conducted by the University of Toronto suggests that the ideal system has 80% of the project firmly in place with the crowd having a say in the remaining 20% (e.g. choice of colours, technologies, points of sale etc.);
  • transparency: to what extent do you wish to share your knowledge, technology and research and development results with others – including potential competitors? How will you protect your copyright and intellectual property in such a case?

A significant risk is of course the fact that you may not achieve the desired funding and the campaign fizzles out. However, this is an advantage in a sense. The campaign helps you assess whether there is a demand for your intended product or service on the market. If this does not appear to be the case, you will at least find out in time and be able to avoid the much higher loss of a failed product launch, both financially and in terms of reputation. You can use the feedback received to instigate changes and make a new attempt later on.

If you add up all the fees and the marketing, time and energy involved in a crowdfunding campaign, the cost of this form of financing can be extremely high. With reward-based funding there are definitely a few flies in the ointment. You must declare the funds collected as taxable income. In addition, a pledge is regarded as a sales transaction which is therefore subject to VAT for companies. Take these factors into account when setting your prices. Otherwise the tax office may bring you an unpleasant surprise...

2. For the investor

For a moneylender the challenge primarily involves finding good projects. There is no shortage of attractive initiatives. Quite the opposite in fact. With reward-based campaigns it can sometimes even be difficult to resist the temptation. But what will your investment yield?

Putting money into a project always remains a bit of a gamble, even if you have analysed it thoroughly and you believe in it. Success is never certain and unforeseen problems may occur at any time. With lending or equity-based formulas your complete investment could then be lost.

The chance of this happening is smaller for the reward-based model, as is the amount invested. There is always the possibility, however, that the initiator will not meet his commitments, will only partially meet them or severely delay meeting them. In very rare cases fraud may be involved with the collectors (and your contribution) disappearing into thin air.

A clear picture

Do you want an objective opinion before joining a Belgian crowdfunding project?

If the project has a prospectus obligation, you can look at it with the FSMA approved prospectus. Among other things this contains further information about the initiator and the legal form of your investment (share, loan etc.). An approval or licence from the FSMA or the National Bank of Belgium does not however mean that these bodies automatically deem the project suitable for investment – it is up to you to weigh up the risks.

You can also use the FSMA website to check whether the internet platform and/or the initiator are under special supervision by the FSMA or the National Bank of Belgium.

Discover More

Contact
Close

Contact

Complaints

We would like you to answer a few questions. This will help us answer your request faster and in a more appropriate manner. Thank you in advance.

Is your company/organisation client at BNP Paribas Fortis?

My organisation is being served by a Relationship Manager :

Your message

Thank you

Your message has been sent.

We will respond as soon as possible.

Back to the current page›
Top