Ahead of the spring 2021 budget, the UK Treasury announced that the UK will launch the world’s first green savings sovereign bond for retail investors. Chancellor of the Exchequer Rishi Sunak said it would allow savers to help the country’s transition to net zero by 2050.
The Green Savings Bond will be offered through NS&I, the Treasury-backed savings provider, which offers premium bonds among a range of other savings products.
Chancellor Rishi Sunak said earlier this year: “The UK is a global leader in the fight against climate change, with a clear goal of reaching net zero by 2050 and a ten point plan to create green jobs as we move towards a greener future.
“In a world first, we are launching a new Green Savings Bond that will give people across the UK the opportunity to contribute to the collective effort to tackle climate change.
“And we are also launching new competitions that will unlock innovation in renewable energy and help us develop the cutting edge technology we need to achieve net zero.”
In February, HM Treasury said more details would be released in the “coming months” and that the product would then go on sale in 2021.
NS&I has since created a green savings section on its website, which states, “We are offering a green savings product on behalf of the government. Coming later in 2021.”
While details of the savings program remain under wraps, Express.co.uk asked Kay Ingram, director of public policy at national financial planning group LEBC, for her thoughts on the upcoming product.
“Until we know all the details of the new NS&I Green Bond, I can’t say if this is something we will recommend to our clients,” she said.
“There is clearly a lot of interest in this area of investment among investors and given the need to tackle climate change and the legislative weight behind this, it is likely that investments in green technologies will continue. will generally wear well.
“Having said that, this is a growing area of investment opportunity, so the competition will be fierce.
“Whether investing this way through a fixed interest vehicle or through a buying equity stake in a green fund is the right thing to do will depend on individual circumstances and the investor’s risk appetite. .
“An immediate challenge for fixed rate investors, who invest for the longer term, is the rising rate of inflation, which tends to erode the real value of fixed rate investments over time.
“The Bank of England recently signaled that it expects inflation to hit 2.5% by the end of this year, down from 0.7% in March.”
Ms Ingram also highlighted another key point that retail investors should be aware of.
“It will also be important for savers to recognize that investing in new technology and innovation is a riskier proposition than holding savings in cash. Therefore, any positioning of this offering will need to reflect the real risk to investors in both the literature on the products and the yield offered, ”she said.
“Obviously, the government will be aware that confidence in NS&I was severely damaged when they reduced the interest rates offered to savers from the best of the market to the worst, so any offer will require special features and favorable tax treatment to make it is flying off the shelves, given the wide choice of alternative green investment opportunities available.
“We look forward to the details.”
Earlier this year, Ricky Knox, CEO of Tandem Bank, commented on the new green bond product.
Sharing his thoughts on whether to buy these bonds when they are released, he said, “It all depends on what kind of rate the bond might offer – so it is in the government’s interest to make them attractive. .
“Rishi and his team will know that there are already a plethora of other green bonds offering competitive rates,” he added, before highlighting the Gatehouse five-year fixed-term green savings bond.
“But with savings rates so low right now and funding so cheap, the government won’t have too much trouble selling for those of us who want a guaranteed return while freezing our savings,” he said. he added, he added. “.