Chancellor Rishi Sunak used his 2021 spring statement to announce the introduction of NS&I green bonds.
The Treasury-backed scheme is designed to help the UK meet its commitments to tackling climate change. The money invested is supporting “green” projects, helping the UK to meet its greenhouse gas emissions target of net-zero by 2050.
While the bonds arrived in October 2021, the initial reaction to the rate on offer (0.65%) was muted.
On 15 February 2022, however, the bonds were relaunched with a new interest rate.
Keep reading to find out if the NS&I green bond is right for you, and what alternatives are out there if you want to align your investments with your values on green issues.
Everything you need to know about NS&I green bonds
What is a green bond?
The green bond is a fixed-rate, three-year investment being offered by NS&I. This is the same government-backed provider of premium bonds, which means the money you invest is 100% safe.
By opening an NS&I green bond, you are effectively lending money to the government. The government, in turn, promises to use your money to support green projects here in the UK.
The chancellor has pledged at least £15 billion to help with projects to clean up the UK transport network, aid our transition away from fossil fuels to renewable energy, and help to reduce pollution.
Am I eligible to open one?
The NS&I green bond is open to anyone over the age of 16 who holds a UK bank account.
There is a minimum deposit amount – you’ll need at least £100 to open one, with a maximum limit of £100,000.
After an initial 30-day cooling-off period, your money will be tied up for the three years of the term with interest added annually, but payable only at maturity.
The newly announced rate of interest is 1.3%.
Alternatives to green bonds
As with any investment you make, it pays to shop around and to think about what it is you want from your choice.
While there are currently better rates for fixed-term bonds on the market, you might opt to sacrifice returns for the chance to help the UK reach its CO2 emissions targets.
Aligning your money with your values doesn’t need to mean sacrificing returns though.
ESG investing
You can choose to invest your money in funds that have a good track record in terms of environmental, social, or governance factors.
- Environmental factors include a company’s attitudes to sustainability, renewable energy, and the environment.
- Social factors could involve good working conditions, pay equality, and a company that understands and values its place within the local community.
- Governance factors might include equality at board level and transparency in their anti-corruption regulations.
Back in August 2020, we looked at how ESG investing fared through lockdown and found that both inflows and returns were on the rise. This continued through 2021 and ESG looks set to be a vital part of many investment portfolios in the year ahead.
The switching pension effect
Back in May 2020, filmmaker Richard Curtis co-founded the Make My Money Matter campaign. With £2.6 trillion held in UK pensions, the project is designed to encourage UK investors to switch their pension wealth into sustainable funds.
Make My Money Matter found that switching a £100,000 pension pot into ESG-friendly funds could reduce carbon emissions by 64 tonnes.
The reduction is so pronounced that the campaign launched its “21x Challenge”. The name derives from the fact that “greening” your pension was found to be 21 times more effective for lowering your carbon footprint than stopping flying, becoming a vegetarian, and moving to a renewable energy provider combined.
You might speak to your employer to see if ESG funds are an option for your workplace pension or speak to your private pension provider.
Switching pension funds is an important decision and you should always seek professional advice before you make the decision. If it’s right for you, though, it could make a huge difference to the planet.
Get in touch
NS&I green bonds are a safe way to invest your money over a fixed-term and with a set rate of interest. By doing so, you’ll be supporting green projects and helping the UK to meet its target of net-zero greenhouse gas emissions by 2050.
But NS&I green bonds aren’t the only way to align your money with your values on ethical and sustainability issues.
If you’d like to explore your options for greener investing, get in touch. Contact us now to find out how our Chartered financial planners could help you.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.
