• Mon. May 20th, 2024

How can I make my savings Green? – Finance Monthly

A recent survey undertaken by  McKinsey and NielsenIQ [Do consumers care about sustainability & ESG claims? | McKinsey] revealed that 78% of US consumers would like to see their financial service providers form part of their desire for a sustainable lifestyle. All around the world, we are likely far off mainstream banking blazing a trail for sustainability, but in this article, we will see what choices a UK consumer can make in an environment with less competition than the US. 

There are different extents to which individuals can align themselves to the green moment or opt to distance themselves from the funding of an industry or social cause they do not wish to support. Many sources on the web seem to discuss from the perspective of those who choose to invest in specific companies, as if they are buying stocks and shares, however, a more ordinary person does not have the time or disposable income to invest in this way. Rather they rely on banks to do their jobs, which includes taking their deposits and channelling this money towards loans to companies to facilitate investment. For most banks, this investment could be a wind farm or a coal mine with roughly equal probability. 

Current Accounts and Small Pots

Ideally, we keep a minimum of two months’ salary in a current account where we have quick, tap-of-a-card, access to it. Better still is holding cash equivalent to six months of anticipated expenses, however, we each have differing abilities to do this [How much cash should you hold? | Hargreaves Lansdown (hl.co.uk)].  

 In terms of current account options which are not going to channel deposits toward almost any sort of investment project, there are a few small ‘green’ banks which are more selective in who they will channel money toward. For example, Triodos Bank [Ethical Current Account (triodos.co.uk)] offers a current account which aligns with supporting renewables, education and social housing.  Other options exist with the Co-operative Bank which is much older and better known in the UK or perhaps the Ecology Building Society. 

The key aim in picking a current account is not funding bad stuff, next, we turn to how we fund good stuff!

Saving for the bigger picture

Again, let’s start by setting the ideal position. Hopefully, readers are not letting the cash balance in non-interest-bearing accounts pile up too high. For long-term savings goals the element of choice in achieving green and social objectives as savings tend to have a direct impact on sustainable projects, through the investment they enable. 

ISA savings accounts are the most common form of savings account in general as they allow £20,000 of savings per year with no tax on interest earned [Individual Savings Accounts (ISAs): How ISAs work – GOV.UK (www.gov.uk)]. An ISA which aligns with sustainability is hard to find, especially from a high street bank and also as a cash ISA option. Stocks and Shares ISAs with ethical and green screening are more readily available; the issue here is that their value can increase or decrease. For many, this makes them too risky and an unsuitable way to save! 

 If it proves difficult to locate a suitable cash ISA, an alternative to consider is NS&I’s green savings bonds [Green Savings Bonds | NS&I (nsandi.com)], whilst bonds are not a savings account, and the uninitiated should be sure to read up on them first, they offer a guaranteed rate of return and may fill a gap for those most committed to greening their financial presence.

This does not constitute direct financial advice. Mentions of companies or products do not constitute an endorsement. 

 

 

 

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