More choice for eco-conscious savers

The number of ‘green’ savings accounts has risen by more than 25% in the past 12 months.

With many people increasingly concerned about the environment and their impact on the planet, products that are marketed as ‘green’ and ‘eco-friendly’ are becoming more common.

For example, there are now 39 savings accounts that have a ‘green incentive’, up from 30 accounts one year ago, according to analysis by Moneyfactscompare.co.uk.

This comes as the Financial Conduct Authority’s (FCA) Financial Lives survey found that 81% of adults surveyed would like their investments to be put towards a good cause , as well as providing a financial return.

“While rate continues to be a compelling motivation for those making financial decisions, it’s important to remember that there may be other factors at play for consumers considering their options. For example, some will want to invest in companies that possess a clear green focus,” commented James Hyde, Spokesperson at Moneyfactscompare.co.uk.

But “it’s important to remember that some ‘green’ components will be more significant than others,” Hyde added.

Sustainable banking

The nature of green incentives can vary, with some having a greater impact than others. As a result, savers will need to research the credentials of each account and provider to weigh up how green it is and whether it is worth getting.

While some providers only offer one ‘green’ product, other providers are committed to sustainability across the company as a whole.

“For example, Triodos Bank uses all deposits to finance green and community initiatives, co-financing 640 renewable energy projects and 42,900 hectares of nature and conservation in 2023 alone,” Hyde explained.

“Meanwhile, Ecology Building Society funds sustainable community projects, including Passivhaus development and eco renovation schemes,” he continued.

Correct as at 16.5.2024. Source: Moneyfactscompare.co.uk

Other providers offer individual ‘green’ products alongside their range of standard products.

These are designed to fund specific environmentally-friendly projects, such as planting trees, supporting electric transport and financing eco-friendly lending portfolios.

Correct as at 16.5.2024. Source: Moneyfactscompare.co.uk

The risk of green-washing

One of the key concerns around so-called ‘green’ products is the question of how green they really are. There’s a danger that providers may exaggerate how sustainable a particular product is and make unsubstantiated claims to appeal to eco-conscious consumers.

To try to address this issue, the FCA is introducing an anti-greenwashing rule on 31 May 2024 that means providers will have to accurately label and describe their ‘green’ products so customers can clearly see how sustainable they are.

“Our findings align with FCA research that there’s growing demand for sustainable products and services, and we welcome the new anti-greenwashing guidelines as a starting point for clearer, simpler consumer information about products badged as ‘green’” commented Gareth Griffiths, Chief Executive Officer of Ecology Building Society.

The FCA hopes that these new regulations will prevent consumers from being misled into thinking an account is greener and more environmentally friendly than it actually is.

“The promotion of accounts with taglines such as ‘plant a tree’ can be misleading as it is more relevant to look at the provider’s broader lending and investment policy, target setting and transparency on carbon emissions,” Roger Hattam, Director of Retail Banking at Triodos Bank UK, noted.

How do the rates compare?

While some ‘green’ savings accounts pay relatively competitive rates, savers could find higher-paying accounts if they broaden their search beyond those that are labelled ‘green’.

There are currently several easy access savings and fixed rate bonds that are paying more than 5.00%, which would pay a higher return than most of the accounts mentioned above.

“Some consumers may have to compromise on maximising their financial returns if they want to bank as sustainably as possible, however – some green providers choose not to compete at the top end of the market due to the increased costs of investing in certain areas or practices,” Hyde explained.

Whether your main concern when choosing a savings account is rate, the green credentials it may have or another feature, it’s always worth comparing accounts so you can find one that best meets your requirements.