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Green savings bonds introduce investors to climate-conscious companies.

Key facts to consider

  • China and USA urged to step up as UN warns world 'very far' from meeting climate goals
  • Biden hikes cost of carbon, easing path for new climate rules
  • Aviva sets target for net-zero carbon footprint by 2040
  • Fossil fuel cars make 'hundreds of times' more waste than electric cars
  • Climate leadership seen as key method for levelling up UK.
  • Permafrost sensitivity to global warming of 1.5C and 2C in the northern hemisphere
  • Responding to the climate emergency: how are UK universities establishing sustainable workplace routines for flying and food?
  • NS&I set to host the new bond.
  • Retail investors, a lot of teenagers, have entered the market, and they're not letting go.

A savings bond of an as-yet-undetermined size and structure will be offered this year through National Savings & Investments, the government-backed savings scheme.

The Financial Times

why are stocks important right now?

The stock market is today, a far stretch from what may have been depicted in recent films such as the 'Wolf of Wall Street' and the 'Big Short'. Tickers are no-longer on paper, and pink slips are not a physical item. Most of you reading this now are questioning if that bit was English... Rightly so, since the boom in technology stock trading is now seen as candle charts on screens, many screens, like 6 or more between 9am and 5pm (thereabouts) on US time moving billions around every day. From upcoming tech, EV and biopharmaceutical to oil, gas and financial, interest will move around forcing leaps and drops based on news about a business or rumours of future successes. 

Something like this may sound complicated and overwhelming, so why would 'green stocks' be relevant today. Apps. The new generation z and millennial crowds are born with apps and smartphones in hand. And now they can trade those same stocks from Wallstreet in their palm, in bed, in the bathroom. UK stocks are generally focussed on traditional oil, gas, and manufacturing so there is limited interest for a younger audience. But now with commission-free trading platforms that can be downloaded instantly on a mobile phone, anyone over 18 can be exposed to the Biotech, UAV, EV and advanced technologies divisions that may interest them, able to invest in 'cool' brands like Tesla or Apple, and brands of the future.

As we move into 2021, this interest has escalated since the beginnings of 2020. Reddit communities daily discuss stocks that are 'liked', localised app-based groups build communities of like-minded individuals of similar ages to learn and research which stocks have a good sentiment. This access is available also to under 18s generating momentum for the future generations for when they are able to invest themselves. With the proposal of potential earnings able to outdo someones yearly salary from small investments within months; for a generation that may be on furlough or out of work with many jobs on hold due to pandemic the interest in investing or trading is clear. 

But with this comes many risks, the risk to gain is equal to that of loss. So once interest is gained the natural trend to find safer investment opportunities is natural, highlighting security bonds and places to hold wealth. Equally, for a generation that cares about global welfare, the added benefit that their stored wealth can be used to do good, helping boost green developments for future growth such as what the government is suggesting should resonate. 

a green economy?

Ahead of the November Summit COP26, the government seeks to promote its green credentials. France sold its first sovereign green bond in 2017, while Germany, Poland and Ireland have all issued their own, and Italy set out its framework for doing so early in 2021. This places the UK late to the party with some serious catching up to do. This step, amongst the huge interest 2021 has seen from retail investors in both short-term and long-term deep value stocks will speak volumes in years to come for environmental awareness.

In the budget announcement, Rishi Sunak will pledge £22bn for a new bank in the budget to boost the green economy. Sunak will set aside an initial £12bn of capital and £10bn of government guarantees for the UK Infrastructure Bank in the budget. The new bank will launch in the Spring and operate UK-wide and it is hoped will unlock billions more in private finance to support £40bn of infrastructure investment for the economy. Treasury officials said it should help to achieve the UK’s commitments on net-zero and ‘levelling up’ communities which extra government support.

so is this a bet on 'green' companies performing?

Well, no. Your money is largely safe as with all banks and the bond is expected as most other offerings from NS&I to be a held account with a fixed rate of interest. Where it gets interesting, is what they do with your money. 

does my money get used for sponsoring or endorsing green projects?

Essentially yes. It will be used to both help environmentally-focused projects launch and continue efforts on existing projects. This is all part of the Government's efforts to hit net-zero carbon emissions by 2050. Projects include building offshore wind farms, accelerating the transition to electric vehicles, renewing housing and public transport.

The Government, through NS&I, will pay you an interest rate in return for the use of your money (like renting it) over that period, and then it'll pay your lump sum savings back in full, plus the interest, once the bond's term is over. 

The Treasury says this bond will "give savers the opportunity to take part in the collective effort to tackle climate change".

are there other banks that offer 'green' savings?

A handful yes:

  • Ecology Building Society - Provides lending to support sustainable projects and properties, with £43.5m lent for these purposes in 2019.
  • Gatehouse Bank - Plants a tree for each new savings account.
  • Tandem - Green lending initiatives, helping to make UK homes more sustainable.
  • Triodos - Invests in a range of companies that have a positive impact on the environment in order to 'support a sustainable future'.

post-Brexit carbon trading scheme.

The government has announced that the UK’s post-Brexit carbon trading scheme will launch in May, “with the first auctions that replace its EU counterpart expected to attract strong interest from buyers”, The Financial Times.

The UK emissions trading programme sits at the heart of the government’s pledge to become a net-zero economy by 2050. It sets a limit on the volume of greenhouse gases that heavy polluters can emit and requires them to buy carbon credits, which can be traded, to cover their output. The plans released show the first trades will take place on May 19, pending regulatory approval.

three out of 10 of the UK’s biggest public companies emit CO2 at a rate that would contribute significantly to the climate crisis, according to analysis that shows the scale of the challenge for corporate Britain to cut emissions to zero

The Guardian, 2021.

challenges of going carbon neutral.

Boris Johnson has been warned by some of his foreign ambassadors that a planned coal mine in Cumbria is damaging his reputation. BusinessGreen says that campaigners, led by the prime minister’s own father, are urging Boris Johnson to enshrine a “2030 nature protection goal” into law: “Conservative Environment Network international ambassador Stanley Johnson is one of more than 50 campaigners, environmental NGOs, and politicians to have signed an open letter to the Prime Minister urging him to back up his public commitments to protect 30% of land and ocean by the end of the decade with a legally-binding national target.

levelling up Britain with climate leadership.

To quote the phrases used by Boris Johnson, the 'build back better' and 'level up' the country, analysts are hedging their bets of a green growth recovery

green growth is the only way forward to build back better...One of the major challenges on the sustainable agenda is ensuring proportionate actions across the country are taken in a timely and effective fashion on industrial processes. We need to redesign internal mechanisms and adapt our industries to new standards. Industrial sectors including cement, food and drink, iron, and steel account for approximately two-thirds of industrial carbon emissions. Net-zero is challenging industries to reduce emissions without reducing their competitiveness. Our policymakers are aiming to create a net-zero carbon industrial cluster by 2040, focusing on a few industrial mechanisms and tools, such as energy and resource efficiency, electrification, hydrogen, and carbon capture and storage…This translates into replacing inefficient incentives and restructuring obsolete strategies to encourage entire industries to transition into sustainable practices.

Kwasi Kwarteng, UK business and energy secretary of state.

raising taxes, or shifting taxes.

Post-pandemic and with a nation in crisis, taxes are the last thing people want to hear, so trying to sell a green agenda off the back of hikes to taxes to pay for it is difficult. The short-term effects of COVID-19 have been severe, but the longterm effects of climate change could be significantly worse and much like the fast-spreading virus, acting quickly is key to survival. In order to achieve this, plans are being implemented to try to calculate the most effective ways to boost the economy whilst reducing its impact on the environment.

The focus seems to be on 'big cars', which use more fuel and produce more emissions and therefore could pay more. The growing interest in 'mini-SUVs' and a trend for car manufacturers to make slightly larger versions of small cars such as the Fiesta Active produces a middle ground in the economy of new cars with efficient engines but not at a price point or interest level to be fully electric or even hybrids. Electric car adoption is growing, but consumer sentiment to the types of cars they want to buy is in the wrong market right now for full adoption to take place. A change in taxes, which could be seen as a 'climate tax' will directly affect this market. 

 

how can you capitalise on this growing interest?

Who is your target for this year and the next 5 years to grow the staffing of your business? Where can you target upcoming financial advisors? Do you find them at university or college, or can you speak to them on their own social media?

We are already considering these questions and actively thinking about what little Timmy the 18-year-old beginner investor wants to be in 15 years. How he, or his friend Tara want to learn more and get a degree in a newfound passion. What jobs they would be considering in the future and how it might be worth getting to know them now before they even get to that decision process.

Get in touch with our teams today, and we can talk you through our options to help hire for your business.