Chancellor Rishi Sunak this week revealed further information on the long-awaited green bonds initiative, including a delay to their introduction.  Originally scheduled to be launched this summer, investors and savers interested in the scheme, will now have to wait until next year.

Sunak made the announcement during a speech at Mansion House in London, during which he pledged to transform the UK’s Financial Service industry into the ‘most advanced and exciting’ hub in the world. 

As part of the government’s efforts to achieve net-zero emissions, green bonds will be sold in hope of raising billions of pounds for green initiatives nationwide. With many households across the UK having amassed additional savings during the pandemic, the government hopes more people will be interested in the new green bonds than similar prior initiatives.

Mr Sunak also confirmed that the bonds, issued by Treasury-backed bank National Savings and Investments, will be available exclusively online. 

All proceeds raised as part of the initiative will be used to fund environmental initiatives like wind farms and solar power. The government has also promised to publish a full report on how many small businesses benefit from the scheme and the number of jobs it creates.

Aimed at Everyday Savers

Similar bonds for institutional investors are already available in Sweden and Germany. However, the government has made it clear that the initiative in the UK is aimed primarily at everyday savers, though will also be open to investors.

“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,” said NS&I chief executive, Ian Ackerley.

“This exciting new Bond will be available to purchase from nsandi.com later this year and will give UK savers the opportunity to contribute towards green projects to help make the world greener, cleaner and more sustainable.”

Speaking at Mansion House, My Sunak expressed confidence in the initiative’s long-term potential. 

“As the baton passes to a new generation of leaders in finance, I feel optimistic about the future. Ambitious at home. Confident internationally,” Sunak said. 

“With a plan to make this country the world’s most advanced and exciting financial services hub for decades to come, creating prosperity at home and projecting our values abroad.”

The green bonds will be available over a three-year fixed term, open to individuals aged 16 and over with a minimum investment of £100 and a maximum of £100,000.  However, no interest rates have yet been revealed for the bonds, which some fear may be too low to have the widespread appeal the government expects.

Online Only Bonds

As the fixed rate bonds will be available exclusively online, customers unwilling to purchase them digitally will not be able to take part in the scheme for the time being at least.

“By offering the product online only we are meeting the green sustainable values of the product,” said an NS&I spokesperson.

“Our online service will give customers a simple and straightforward way to apply for and manage their investment,”

“However, we recognise that some customers will not be able to invest online due to exceptional circumstances. If a customer thinks this applies to them, we’ll discuss their circumstances and options with them by phone.”

All interest earned will count towards the bond holder’s personal savings allowance in the year that the bond matures – up to £1,000 tax-free for basic rate taxpayers and £500 for higher-rate payers.

Commenting on behalf of Quilter Cheviot, director of responsible investment Gemma Woodward questioned whether the funds raised by the initiative would even scratch the surface of what’s actually required. 

“The UK’s been behind the curve for some time now when it comes to green bonds so it’s good to finally see concrete proposals published,” she said. 

“On the retail side, 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.,”

“For these reasons, the retail products should be supported, and we hope to see strong demand once they are available. But will they actually make a difference? The amount of cash needed to transition to a ‘green’ economy is going to run into the hundreds of billions, if not trillions.”

Unanswered Questions Remain

Elsewhere, Savings Champion co-founder Anna Bowes said there were still many important questions to be answered about the NS&I green savings scheme for best investments. 

“Savers who were looking forward to the new NS&I green savings bond will be disappointed to find out that is not going to be launched until later this year, as opposed to the Summer, as previously indicated in the Spring Budget,” she said. 

“While we now know that savers will need to lock their money away for three years, we’ll have to continue to wait and see what the rate of interest on offer will be,”

“In the meantime, competition has been fierce recently especially among fixed rate bonds, so rates have been rising. Let’s hope this doesn’t change and that NS&I acts accordingly.” 

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