National Savings & Investments Green Savings Bond

Last week, National Savings & Investments set out some details of the three year, fixed rate Green Savings Bond it will be launching later this year. There were two things missing from the announcement:

  • The rate of interest payable.
  • The date you will be able to buy them.

The Green Savings Bond is a new development, and it seems attractive at first sight. But I’m not entirely convinced.

How Green is it?

The money which is invested in the Green Savings Bond will only be used in the following areas:

  • Making Transport Cleaner.
  • Renewable energy.
  • Preventing pollution, including recycling and carbon capture.
  • Using energy more efficiently, such as decarbonising public buildings.
  • Protecting natural resources.
  • Adapting to climate change – e.g. flood defences.

So, it sounds like the Green Savings bond should be a good thing for responsible and ethical investors.

But…

The Green Savings Bond is only part of the money which the government raises every year. It is still going to raise money from taxation, by issuing gilts and from “non-green” bonds and other National Savings accounts.

The same government, which is raising money through a Green Savings Bond, committed itself to spending £27billion on road building from 2020 to 2025. It also supports the expansion of Heathrow airport.

The Green Savings bond looks like it will just be a way for the government to raise money easily, making it easier for it to raise money for all of its projects, not just the green ones. After all, if a lot of money is raised from Green Savings Bonds, the government can spend more of the money it raises from taxation on non-green projects, like road building. Environmental investors won’t see this as a success.

It seems likely that the interest rate for the Green Savings bond will be lower (if that’s possible!) than the rate for comparable savings products – after all, as well as receiving interest, you’ll be able to say that you are helping the environment. By investing in the Green Savings Bond, you’ll just be reducing the total interest rate the government pays for all of its projects, regardless of whether they are green or not.

Why It Still Might be Important to Invest

The government is also coy about how much money it is intending to raise from the Green Savings Bond. It has been explicit about its intention to raise £15bn of green gilts (but it is doing this behind closed doors in the City of London), but it has said very little about its target for Green Savings Bonds.

Most green investors will be happy for their money to be used to provide finance in the areas specified for the Green Savings Bond. If the green bond proves popular, the government will be tempted to raise more money in this way. There is an opportunity for green investors to show the government that they are prepared to put their money where their mouth is.

Another reason to invest is that there are very few other, low risk, green investment opportunities. If the National Savings Green Savings Bond is a success, then other governments and financial institutions may be persuaded to follow suit.

Oliver Wise


This guide is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.

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