Expert: Andrew Pike, Head of Intermediary Relationships, NS&I. Facilitator: Jo Goddard, Green & Good
Key Takeaways
- NS&I will be launching a green bond for investors by the end of 2021. This plays a part of the UK’s green finance strategy
- Projects funded will include renewable energy, green transportation, protecting natural resources, preventing pollution, energy efficiency and climate adaptation
- Customer attitudes show that there is some misunderstanding of green investing and fear of greenwashing
- The green investment market is growing with more invested in green funds than ever before.
Context:
The government has announced a green finance strategy with the development of the UK Infrastructure Bank. This has a target of reaching net zero by 2050 and aims to engage with the financial services system to help capital transition to a green economy. A green taxonomy will be introduced to classify which products and services are deemed green for investment purposes. As part of this, NS&I have introduced a green bond to be launched by the end of 2021.
1. The NS&I green bond plays a part of the UK’s green finance strategy
The UK green finance strategy aims to help capital transition to a green economy. As part of this strategy, the UK has created an Infrastructure Bank to support this transition - the Bank has a net zero target of 2050. A green taxonomy is being developed to classify which projects are determined to be green, and therefore contribute to the transition towards a greener future. The bond will have a 3-year fixed term and investment starts at £100 per person. Maximum investment is £100,000. Interest will be applied annually and paid on completion of the bond period. There is currently no other bond like this on the UK market.
2. Projects funded will include a wide range of climate mitigation, adaptation and biodiversity projects
The bond funds will go towards several categories of projects ranging from green infrastructure to energy efficiency projects. The six main categories are renewable energy, green transportation, protecting natural resources, preventing pollution, energy efficiency and climate adaptation.
3. Customer attitude surveys show that there is some misunderstanding of green investing and fear of greenwashing
There is still low awareness of green investments and green finance in general. 57% have not heard of it while 43% who have heard of it, can’t really explain it. There is also fear around greenwashing coupled with low trust in the government.
When asked people are likely to say that they will choose environmentally efficient products or services over the alternative, however, in reality this is not actually the case, particularly when things cost more.
To allay some of these fears, the projects that the bond is invested in will be disclosed, and aligned to the green taxonomy to reduce worry of greenwashing.
4. The green investment market is growing with more invested in green funds than ever before.
In October 2020, £1bn was invested in sustainable funds, the highest ever placed. Current sustainable funds under management stands at £7.8bn, that’s 3% of overall funds invested.
There is no tax incentive for this bond, which some advisers see as a disadvantage, however others can see that this bond will attract those savers who are looking to invest directly in green projects rather than in companies with good ESG scores. It offers a previously unavailable product to clients who are looking to make a direct impact to a greener future, with the security that NS&I offer.
It is expected that the younger generation may be interested in the product, and that they may impact older family members to also invest.
