How one man shook off his ‘old boy’ banking roots to become an ethical investor

Never quite comfortable in the ‘rotten’ culture of corporate finance, Ben Prior, founder and CEO of Earthworm, talks to Martin Friel about greenwashing by bigger firms and how to make companies more honest

A decade on, Earthworm has 19 firms in its books, including a vertical farm and a solar power operation (Earthworm)

What do you do if you’re a stockbroker that enjoys the money and the human interaction but can’t stand the dubious ethical approach to investment?

There are a few options. You can suck it up, sell your soul and hope that you don’t regret it on your deathbed. You can quit the market and try something completely different. Or, like Ben Prior, you could set up an investment fund that does good.

Prior is the founder and CEO of Earthworm, an environmental fund manager focused purely on the food, waste and energy sectors. It is one of a growing number of ethical investment funds that, collectively, hint at the possibility of genuine change in one of the least ethically discerning sectors.

Assets held in ethical funds in the UK has almost tripled in the last ten years from £4.5bn in 2008 to nearly £17bn in 2018 and the idea that they are a “nice thing” rather than serious investments, is changing.

The FTSE4Good UK Index returned 43 per cent over five years beating, albeit by a whisker, the FTSE All Share Index which returned 42.5 per cent. Ethical investment is, it would seem, coming of age but Prior, who launched Earthworm in 2010, is not so confident.

“I would look with a fairly squinty eye at a company, like a fund management business, that has never had an environmental fund until, let’s say, the last two years,” he says. “Why is that? I think I probably know the answer…”

He knows better than most as he started out in the traditional fund management business and he believes many firms are simply engaging in greenwashing, the practice of creating a veneer of environmental responsibility for the benefit of the public image. After leaving university with a language degree and ruling out following his father into the haulage business, Prior was at a bit of a loss as to what kind of career to pursue. But a golfing contact got him an interview at Barclays in the late nineties.

“My interview consisted of an hour-long chat about golf,” he says. “And at the end of that hour, the guys asked me when I could start, so I started on Monday.”

He relates this anecdote somewhat sheepishly. It’s clear that he’s uncomfortable with how it happened, relying as he did on the “old boy’s network” to get a job. But that discomfort is not retrospective. It has existed from day one.

“The first thing they said to me was ‘here’s the book, go and get your exams’ and as soon as you got your exams, you were licensed to give advice,” he says. “Was I ready? Nah! I had no life experience really.”

But via stints at various investment firms such as Noble & Company and Brewin Dolphin Securities, he gained the necessary experience, particularly in tax-based investments, a niche that was later to become a cornerstone of Earthworm.

These people I was selling to – financial advisers, wealth managers – they would say ‘I’ll give my business to the person who takes me out for the biggest lunch’ 

It was in his post-Barclays career that he started dealing with IFAs and wealth managers and while he enjoyed the people interaction he found that the ethics of many of them were lacking.

“The culture of banking was rotten through and I think it still is,” he says. “These people I was selling to – financial advisers, wealth managers – they would say ‘I’ll give my business to the person who takes me out for the biggest lunch’ and these guys are giving investment advice to people like you and me.”

He knew he had to get out, but it wasn’t really until the arrival of his two children that it dawned on him that he wanted to do something a little less selfish. But he still wanted to make money and from those two apparently contradictory requirements, Earthworm was born.

It began with raising £2m to build a composting plant managing waste for Warwickshire County Council. The fund eventually exited the facility at a decent return for investors and from that point, it was clear to Prior that there was a future in this ethical investment lark.

Prior enjoyed the interactions he had in his past career, but found the ethics lacking (Earthworm)

Today, Earthworm has 19 firms in its books including a vertical farm, a solar power operation, an environmentally-friendly fish feed producer and of course, they are still in the composting game. What ties these disparate businesses together is the fact that the technology they are employing is cutting edge.

And as such, they are inherently risky investments which is why Earthworm’s funds largely appeal to mature investors, smaller institutions, IFA’s and wealth managers. But Prior is keen to weave the ethical thread further through the business, beyond the projects it invests in and make ethical investment much more accessible.

“We’re launching a new bond very shortly, which is going to be investible from a minimum of £100 and we are looking to attract a much broader investor base,” he explains. “We started out wanting to be inclusive to all, so to suddenly forget your roots puts you on a slippery slope.

“If you are investing £100 or you are investing £100,000, at Earthworm you will get the same terms regardless. In this world, you will find that if you are prepared to invest more, you can get yourself a better deal which I don’t think is fair.”

He points out that investment opportunities for small, individual contributors, need to pose lower risks which rules out the more experimental, high-tech projects. But in established, proven projects such as solar power and wind farms he sees opportunity for individuals to get in on the ethical investment game.

Prior doesn’t see any genuine competitors to his investing model today but he believes he’s only got about two years free run at this space before others enter.

And with the big firms with deep pockets out there looking to greenwash their own operations, is he confident that his ethical and environmental credentials are strong enough to resist selling up to a traditional investment firm?

“I can’t answer that right now as I would like to think not, but if someone slapped a big cheque on my desk and said they’d buy my business...”

He pauses. “Until I am faced with that proposition, I can’t tell you whether I would accept it or not, but I hope I would say ‘on yer bike’.”

Either way, firms such as Earthworm seem to be carving out new possibilities for how investment firms behave and how they can affect real societal change. But Prior isn’t interested in becoming a poster boy for the ethical investment community.

“I just want to do what I do, do as much of it as I can, and then hopefully create something that is gonna do something really interesting,” he says.