Impact investing and Trine – a short review

I’ve recently become interested in socially responsible investing, or impact investing. Meaning investing in projects or companies that have a positive impact on the people and the environment.

I’ve recently become interested in socially responsible investing, or impact investing. Meaning investing in projects or companies that have a positive impact on the people and the environment. If I have money to spend, I should also spend it on good causes.

This is how I found Trine, a small crowdlending company showcasing projects that bring clean energy to emerging markets. Which is a fancy way of saying they invest in solar farm projects built mostly in West African countries.

So, in October last year, I’ve opened an account on Trine, added some funds, and started digging. This is what I found out so far.


Trine highlights

  • Launched: 2015
  • Headquarters: Sweden
  • Regulator: Swedish Financial Supervisory Authority
  • Minimum investment: 25 EUR
  • Loan types: unsecured business loans to companies selling solar-powered systems
  • Loan terms: 12-60 months
  • Currency: EUR
  • Interest rates: 3% – 11%
  • Loans funded: 33 million EUR
  • Default rate: 1.2%
  • Investors: 10000
  • Auto-invest: yes
  • Buyback guarantee: no
  • Early exit: no
  • Accepted investor countries: EEA (European Economic Area) countries and Switzerland

Who is Trine and what does it do

Trine is a small crowdlending platform from Sweden, founded in 2015. It finances only companies that sell, distribute or install solar-powered systems. Its declared goal is to help bring electricity to more than 1 billion people that currently lack access to it.

Each project Trine finances reflects some of the UN’s sustainable development goals:

UN sustainable development goals

To sound a bit fancy, Trine calls its borrowers “solar partners” but hey, everybody has its own quirks. So far, it financed almost 100 loans worth 33 million EUR in Africa, Central America and South Asia. It claims it had brought electricity through solar home systems to more than 2 million people, and thus avoided the emission of more than 180.000 tons of CO2.

The borrowers sell or lease their solar-powered systems to individual households, industrial or commercial consumers. Their customers don’t pay the price for the solar system upfront and instead pay monthly instalments. This is a sword that cuts both ways. On one hand, companies can sell their systems to more consumers that wouldn’t afford the full price upfront. It makes solar systems costs comparable with the costs of alternative options, like kerosene-powered lamps. On the other hand, it takes a few years for the company to recuperate their costs and the consumers could stop paying at any time.

Investors usually get paid interest 3-6 months after the loan was funded, as borrowers have a grace period to put their funds to use. Depending on the loan structure, some of the borrowers pay the full principal at the end of the loan term, while others pay a percentage of the outstanding principal when they also make their interest payments. Interest payments usually every 3 months.

Some of the loans come with investor protection covered by the Swedish International Development Agency, a Swedish government agency with the mission to “reduce poverty in the world”. In the case of borrower default, SIDA would cover 60% of the outstanding principal. I haven’t seen yet any loan covered by that protection fund.


A more in-depth look at Trine

Trine started their operations in 2015, and since then they managed to fund solar projects worth over 33 million EUR. So far, they managed to have only 2 defaults (NewLight Africa projects), putting their defaults rate at 1.2%.

Their team currently has 21 employees, with the main office in Gothenburg, Sweden. You can find them on LinkedIn, Facebook or Twitter. They currently have a job opening for developers. If I want to move to Gothenburg, Sweden, it could be a good company to work for.

59% of the company is owned by Trine’s founders and employees, while 41% is owned by external shareholders, the biggest being Gullspång Invest AB, a VC company that invests only in sustainable businesses.

Trine is regulated by the Swedish Financial Supervisory Authority and it is authorized as a payment institution. Investors funds are kept in a virtual wallet from LemonWay, the same French payment provider Housers and EstateGuru are using.

Like any other crowdlending platform, Trine makes money by charging the borrowing companies a one-time fee for funding the loan and due diligence, and a management fee throughout the loan period. Trine doesn’t disclose the percentages of these fees, and they’re not disclosing their financials either.

Due diligence and company ratings

The companies that approach Trine for funding can expect to get funded in about 6 to 10 weeks.

The due diligence process takes around 2-4 weeks, during which Trine does the followings:

  • An initial screening check, to see if the company profile fits Trine’s goals
  • Documentation checks, including track record for at least a year, sales numbers, previous capital raises, etc.
  • A company visit, to meet the management and assess company culture and the quality of their products
  • Finally, a committee that decides if the loan is approved, at what interest rate, what are the repayment terms, etc.

As part of the due diligence process, the borrowing company gets a rating from A+ to D, based on the following ratios:

  • 30% financial performance, for at least 1 year: sales, profit margins, debt ratios
  • 25% portfolio quality: number of systems sold and installed, default rate, average payment delays
  • 15% people and management
  • 10% financial management
  • 10% processes: customer management, customer acquisition process, after-sales services, insurance, recycling
  • 10% market and environment: competition, regulations, currency fluctuations, local financial infrastructure

I like that a small summary of the due diligence results is also available on each project’s page, so I get a better idea on what the company does and what are the main risks involved.

Who can become an investor

Only residents of EEA (European Economic Area) and Switzerland can join and invest in Trine loans. The KYC process is typical, requiring a copy of an ID and a utility bill for proof of address. Some more documents are needed if you want to invest as a company.

You can fund your account through a debit or credit card or through SEPA (Single Euro Payments Area) bank payments.


What are the risks

It wouldn’t be fun to invest if there were no risks. Although investments shouldn’t be fun.

Currency risks

The loans issued by Trine are in EUR, while the solar companies’ revenue is in their local currency. If their local currency fluctuates (and this happens), their revenue in EUR will get lower. Typically, the solar companies include this risk in their monthly instalments contract, so they pass on this risk to their final consumers.

Market risks

At the beginning of 2019, one of Trine’s partners (borrowers), NewLight Africa, defaulted. The reason was that one of their main revenue streams came from selling gas cookstoves. The Kenyan government started a new gas cookstove programme called “Gas Yetu”, selling the cookstoves at a third of the price NewLight Africa afforded to sell them. NewLight Africa needed new equity investors to survive, and couldn’t find any, so it went bankrupt.

Also, the countries the borrowing companies are coming from are not the most stable countries in the world. Wars, corruption, sudden laws and regulation changes are not uncommon.

Repayment risks

Borrowing companies can suffer cash flow delays because their customers didn’t pay in time. Apparently, this happens less in countries where mobile payments are widespread, as most delays happen because of a lack of financial infrastructure. Customers from poor off-grid rural communities, to which most of the solar projects are targeted, also have unstable incomes based on farming and small businesses that are subjected to all sorts of risks.


My experience with Trine

I’ve opened my account in October, and so far I’ve invested 500 EUR in 5 different loans from Ghana, Kenya, Malawi and Nigeria.

my trine investments

While my investments dashboard shows me actual numbers and repayment schedules, the account overview tries to show me how much impact my investments have:

my trine investments impact

Being sceptical (survival skill), I assumed those were bogus numbers. It turns out there are people that actually developed a mathematical model for calculating how much CO2 emissions are avoided by using solar-powered systems.

avoided co2 emissions formula

Where:

  • S is the number of solar systems installed
  • R is the replacement rate of kerosene lamps per household
  • DL is the discount for losses – products not working or not in use, counted as 3%
  • DR is the discount for repeat sales, to avoid double-counting customers, typically 3% – 10%
  • C is the average annual tons of CO2 emissions per kerosene lamp
  • And W is the estimated solar product life (1.5x warranty), around 3-4 years

If you want to play around with other metrics on impact, you can use this calculator from Gogla (Global Off-Grid Lighting Association).

Monthly investments

trine monthly investments setup

Trine has an auto-invest tool called monthly investments. You can set up a profile, pick interest rates, loan ratings and the amount willing to invest each month, attach a card to the profile, and then wait for your funds to get invested each month.

If you invest more than 500 EUR per month, you also get an additional 2% interest on every loan you’ve invested through the auto-invest option.

While 500 EUR per month is an amount too large for me right now, I wouldn’t mind setting up in the future this option and let my account grow with zero effort on my part.


Conclusions

The average interest rate of my portfolio is currently 6.75%. That’s low compared with other crowdlending platforms in my portfolio. If returns were the main criteria, it should be enough to say no to Trine.

I like Trine though for the things it’s trying to do. Investing a small part of my funds in positive impact projects is in line with the better person I want to become. Trine’s motto, “for people, for planet, for profit”, feels like a full contradiction of all 3 terms, but it’s a bit inspiring.

I won’t invest large amounts here, but I’ll keep increasing my account each month, and maybe even at some point I’ll set up that monthly investment plan and let the wheels turn without my input.

If you want to join Trine, you could use my referral link and get a 10 EUR discount on your first investment. Keep in mind though that investing in Trine is risky and you could potentially lose your invested funds. Also, keep in mind that I’m just a guy with a blog, not a financial advisor, and do your own research before investing.