Budget 2021: Rishi Sunak announces plans for green projects
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HM Treasury announced the UK is to become the first sovereign issuer to offer green savings bonds to retail investors ahead of the Spring Budget, which was unveiled on March 3. The bond is to be offered through NS&I, the Treasury-backed savings organisation which offers Premium Bonds as well as other savings products.
The funds raised via the bonds will be earmarked for projects such as renewable energy and clean transportation.
It is intended to help the UK build back greener and to meet its target to cut greenhouse gas emissions to net zero by 2050.
The Chancellor Rishi Sunak said: "The UK is a global leader on tackling climate change, with a clear target to reach net zero by 2050 and a Ten Point Plan to create green jobs as we transition to a greener future.
"In a world first, we're launching a new green savings bond which will give people across the UK the opportunity to contribute to the collective effort to tackle climate change.
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© GETTYNS&I to launch green savings bonds: Calculator and money
"And we're also launching new competitions that will unlock innovation in renewable energy and help us develop the cutting-edge technology we need to reach net zero."
During his Spring Budget statement in the House of Commons, Mr Sunak said the new retail savings product would "give all United Kingdom savers the chance to support green projects".
Further details are to be set out in the coming months, HM Treasury said in the announcement back in February.
The product will then go on sale later in 2021.
The size, price, yield, term and structure has yet to be determined, but there's already ben plenty of speculation shared on the new product.
Some analysts have already predicted the green bonds will "sell like hotcakes".
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If the government sets interest rates paid on the bonds too low and they won't sell, too high and people will question the cost to the taxpayer, according to Tandem Bank.
Ricky Knox, Tandem Bank CEO said: "We welcome the Government's announcements in the budget around green bonds and green investment as it shows that they are listening to the public's demand for a more sustainable future.
"There are however a lot of uncertainties with regards to the product, with the interest rate paid on the bond being a key factor in its success or failure.
"Whilst the creation of the green bond was a positive that came out of the budget we would have welcomed other more progressive thinking and action if we are to enable every household in the UK to directly contribute to our net zero pledge."
NS&I has set up a green savings bond section on its website, which can be accessed for the latest updates on the product.
© GETTY / EXPRESSBudget 2021 summary
Ahead of the announcement of further details, Tandem Bank shed some insight on what is already known.
Safety will no doubt be a concern when it comes to a person's money, and some may well ask if the Government's green savings bonds are safe.
"In short, yes - because they're backed by the Treasury, unless the UK goes bust, it's about as safe as can be possible," Tandem Bank said.
"Regular UK savings accounts are guaranteed up to £85,000, but it's likely the safety net for the green bonds will be set lower than this.
"Of course, before you sign up, do read all the small print to make sure you're protected."
Are these bonds the only way to invest my money to save the planet?
"Not at all - there's a growing range of other green accounts which offer decent returns on your money while investing in projects to safeguard the environment," the challenger bank said.
"Tandem's new Instant Access Savings Account is definitely one to look at with market-leading rates.
"Along with its upcoming Green Fixed Term Saver and Green Mortgage, Tandem is leading the charge to address consumers' increasing desire to go green."
Some may well be asking themselves whether they should buy some of the green savings bonds when they're released, and according to Tandem Bank, the interest rates could play a role in the response from retail investors.
"It all depends on what kind of rate the bond might offer - so it's in the Government's interests to make them attractive," commented Tandem Bank.
"Rishi and his team will know there are already a host of other green bonds out there offering competitive rates, such as the Gatehouse green savings bond, offering 1.4 percent for five years.
"But with savings rates so low at the moment, and funding so cheap, the Government won't have too hard a sell for those of us wanting a guaranteed return while locking in our savings."