How to go green with your finances

The government’s commitment to creating a net zero economy by 2050 is under scrutiny, but what impact does going green have on your wallet?

In recent days, Prime Minister Rishi Sunak has announced a review of low-traffic neighbourhoods, telling the Daily Telegraph he is “on the side of motorists”. The government has also said it will issue new oil and gas licences in the North Sea.

It comes as the party faces “internal divisions” over its green policies, said BBC News, with some MPs “calling for a rethink”, especially with a general election next year.

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Sunak has insisted that the government is still committed to its 2050 net zero target but even former Labour Prime Minister Tony Blair has questioned how much difference the UK can make.

He told the New Statesman the public can’t be expected to do “a huge amount”, as Britain is not expected to impact climate change when compared to larger countries such as China.

That doesn’t mean doing nothing though, and using your finances to reduce your carbon emissions can work “more significantly”, said Good Housekeeping, than giving up flying or going vegetarian.

Here is how you can go green with your finances and the difference it makes to your wallet.

Changing your shopping habits

Buying sustainable products such as clothes or household goods can cost more initially, explained SaveMoneyCutCarbon, but “it is far cheaper in the long term as the products can be reused multiple times”.

For example, environmentally friendly products such as LED lightbulbs can be more expensive than incandescent versions but last up to 50,000 hours compared with 750, the website added, so you save money because you “buy new products less frequently”.

Buying secondhand could also save you money, said The Times Money Mentor, plus it means fewer products are sent to landfill and will have an “impact on the carbon emissions involved in making new products”.

Sustainable saving

The money you put into your current account or savings doesn’t just sit there.

Your bank will use the money to invest in various companies, explained The Money Edit, but these investments often back industries that you “may not be too happy about”, such as fossil fuels or even the arms trade.

There are ethical and environmentally focused banks such as Triodos Bank, which “invests exclusively in a wide range of impact businesses” and Ecology Building Society, which “bankrolls green initiatives”.

Their interest rates may not be as high as others in the market.

But rates won’t be the only important factor, said Good With Money, “if you care about the future of the planet as well as your own”.

You can see how your bank invests on the YourEthicalMoney website.

Lenders such as NatWest, Barclays, Nationwide and Leeds Building Society are also launching green mortgages.

These mortgages “incentivise buying or owning an energy-efficient home”, explained The Guardian, by offering “more favourable terms” than standard products.

Ethical and ESG investing

While some investors are “content to focus on profit alone”, said MoneyWeek, others may want to invest ethically or with an environmental, social or governance (ESG) strategy through their ISA or pension so they are comfortable about where their money is going.

Ethical funds perform well, said The Money Edit, so investors “no longer have to choose between their conscience and returns”.

This can provide “reassurance that your values will be respected” when investing, added Unbiased, but you have a smaller choice of companies, “which may lead to less diversity”, plus fees can be higher.

Another risk with ethical or ESG investing is that “everyone’s values are different”, said The Times Money Mentor. There is no fixed definition so “check carefully” if your investment provider’s idea of ethical or green matches yours before paying for it.