This year the Government is due to launch its first green investment bond, which will use the money invested to fund environmentally friendly projects. As the Government’s green sovereign bond will be one of many green investments available to consumers, we’ve looked at whether green investments are a good option for consumers and what alternative options are available.
Green investments, such as the bond that is due to be launched by the Government, ensure that money invested is used to back environmentally friendly products, for example funding renewable energy. These types of investments sit under a wider ethical investing umbrella, which has become increasingly popular over the last decade as consumers become more socially and environmentally conscious. Ethical investments enable investors to choose assets and stocks based on their own ethical values and beliefs. While ethical investments not only tend to benefit society and the environment, these types of investments have also been shown to outperform the returns of their non-ethical equivalents. In July 2020, Moneyfacts revealed that 140 ethical unit trusts had grown by 4% in the 12 months to 1 July 2020 compared to a contraction of 1.5% for those not in the ethical category – although investors should always remember that past performance may not be repeated in the future.
For more information about these types of investments, read our guide on ethical investing.
Are green investments a good option?
Clearly, in the recent past there has been a financial benefit to ethical funds, but as already highlighted, past performance is not an indication of future performance. Instead, investors considering putting money into green investments should view these types of investments as they would any other and should speak to an independent financial adviser before making the investment to discuss whether it is the best option for them.
Green investments, as with all other types of investments, have the risk of the investor not making any returns on their investments and could also result in the investor losing all their money, including their initial capital.
Saying this, with the Government set to launch a green bond, it seems that green investments, along with ethical investing, is not just a trend but a type of investment option that is here to stay. As well as this, as already highlighted, in the recent past ethical investments have had periods where they outperformed investments not within the ethical category.
In addition to this, with many investment platforms now offering ethical investment options when investors choose shares, funds or bonds, it is just as easy for consumers to invest in these types of investments as investments not within the ethical category. For more information about investing via investment platforms and how to set one up, read our guide on investment platforms.
Green saving alternatives
Investing is not the right option for everyone and for those who are looking to save for the short-term or who are unable, or unwilling, to risk losing their money through investments, a savings account may be a better option. Fortunately, in recent years there has been an increase in savings accounts that offer a green incentive with the account. For example, Gatehouse Bank pledges to plant a tree in a UK woodland when one of its Green Saver Fixed Term Deposit Accounts or Fixed Term Cash ISAs is opened or renewed and has been funded. These accounts can be found in our fixed rate bond and fixed rate ISA charts.
As well as this, in last month’s budget the Government revealed that it would be launching a green savings account through National Savings & Investments (NS&I), which will use deposits within the accounts to help fund efforts to tackle climate change. The account is due to be made available to consumers later this year.
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