National Savings & Investments unveils UK green bonds

Green Savings Bonds will be launched later this year by state-owned bank, NS&I

                                

National Savings & Investments is to launch Green Savings Bonds on behalf of the UK government later in the year.

The bonds issued by the UK state-owned savings bank will give savers a chance to support green projects at a fixed rate of interest over three years.

The eco projects will include making transport greener, using renewable energy over fossil fuels, preventing pollution, using energy more efficiently, protecting natural resources and adapting to a changing climate.

The idea of launching the bonds was first announced by UK Chancellor Rishi Sunak in March. Although welcomed, questions have been raised about what effect the bonds will have in combatting climate change.

£100,000 investment cap

The bonds will be available to buy and manage online at Nsandi.com and will have a minimum investment of £100 and maximum of £100,000 a person.

Savers must have a UK bank account and the fixed rate is guaranteed for the whole term. Interest is earned daily and added once a year on the investment’s anniversary, and paid on maturity. 

Ian Ackerley, chief executive of NS&I  said: “We are delighted to be offering a new savings product on behalf of the government and playing a key role in contributing towards the UK’s green agenda.”

Strong demand, but is it enough?

Gemma Woodward, director of responsible investment at Quilter Cheviot, told Currency.com that the UK had been behind the curve when it came to green bonds.

“Green bonds serve the dual purpose of allowing people to buy into the green agenda while also providing an outlet for the ‘accidental’ savings built up during the lockdowns,” she said. ”For these reasons, the retail products should be supported, and we hope to see strong demand once they are available.”

However, Woodward questioned whether the bonds would make a difference to climate change. She said the amount of cash needed to transition to a ‘green’ economy was going to run into the hundreds of billions, if not trillions of pounds.

“In this context, the £15bn the government is targeting this financial year seems to be a drop in the ocean, and hardly the numbers needed to ignite a ‘green industrial revolution’,“ she added. “It’s likely the lion’s share of the £15bn will come from green gilts offered for institutional investors, rather than for retail savers through NS&I.”

Investing in net zero

Kate Elliot, deputy head of ethical, sustainable and impact research at Rathbone Greenbank Investments, said: “Green sovereign bonds are a critical step towards net zero, but the devil will be in the details. Cast the definition of ‘green’ too wide and it will undermine investor confidence and dilute the real-world positive impact that could be achieved.

“Our society and economy will see fundamental changes as a result of the transition to net zero, and so initiatives that democratise access to green investment and directly involve individuals, like the new green retail NS&I product, are key.

“Any net zero strategy inevitably requires the use of carbon offsets, but it is vital that these are viewed as the final stage in a decarbonisation programme rather than an alternative to action.

“Offsets are not a silver bullet. We support the creation of the Green Infrastructure Bank that isn’t just seen as a niche green bank, but that can have a real impact by de-risking private investments via low-carbon solutions. We wait and see on this.”

Further reading

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