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Are the new Green Savings Bonds worth investing in?

29/07/2021

In this year’s Budget, Chancellor Rishi Sunak announced the imminent launch of a NS&I green savings bond, promising further details in the summer. He promised that this bond would give savers “the opportunity to contribute towards projects that will accelerate the transition to a low carbon economy, create green jobs, and support the collective effort to tackle climate change”. 

With the details of the Green Savings Bond now having been revealed, are they likely to be a good choice – both for investors and for the planet? 

Why does the Green Savings Bond exist?

With the Government having committed to a net zero carbon emissions target by 2050, a great deal of work has to be done to build the infrastructure needed for this to happen. The launch of this bond will help to fund the work that is needed.

In addition, the aim is to create a product that appeals both to investors who are looking for sustainable investment options, as well as those looking for a lower-risk option that won’t be affected by low interest rates. 

How will the Green Savings Bond work? 

While details of interest rates have not yet been revealed, the Government has now provided some details about how the Green Savings Bond will work. Available both individually and jointly to those aged 16+, these will be three-year fixed bonds with a 30-day cooling off period, and with individuals able to invest anywhere between £100 and £100,000. Interest will be paid each year on the anniversary of when the bond was opened, and will be taxable.

Is it worth investing in?

As yet, with no details of the interest rate on the new Bond, none of the comparison sites are able to accurately assess how competitive it will be. However, its green credentials, government backing and the NS&I name may still foster success. Rachel Springall of Moneyfacts.co.uk says, “As there is trust in NS&I due to its Government-backing, these bonds may well be popular with savers who are happy to lock their money away. Ethical investing is a hot topic and savers may even choose an ethical savings vehicle over a better interest rate if they want to support ethical ventures”. 

Laith Khalaf, financial analyst at AJ Bell, warns that the Government will need to pay at least 1.3% per year to compete with the best-performing bonds on the market – “significantly more interest than its normal cost of borrowing” – at a huge cost to the taxpayer. It seems that the true success of this bond will be unknown until further details have been revealed. 

 

“Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.”

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