Green Savings Bond: What Is It and Where Does the Money Go?

By Richard Howard

At the March 2021 Budget the UK Chancellor of the Exchequer, Rishi Sunak, announced the creation of a Green Savings Bond. This savings product would be available to UK savers via NS&I (National Savings and Investment), the same organisation which offers Premium Bonds, and whose proceeds will be used to support green investment in the UK

In summary, the Green Savings Bond allows UK savers to receive a stable rate of return whilst ensuring their money is put towards ‘green’ projects and initiatives – see below for a list of areas which are considered green.

Green Savings Bond – Headline Numbers

In the October 2021 Budget the Chancellor elaborated on his previous announcement and NS&I gave further details about the details of the Green Savings Bond [1,2,3]:

  • Duration: 3 years
  • Type: Fixed (i.e. you are unable to access your money for three years)
  • Interest rate: 0.65%
  • Min deposit: £100
  • Max deposit: £100,000
  • Date of interest payments: When the product matures (i.e. after 3 years)
  • Tax free: No (due when product matures, if required)
  • Risk: Very low (NS&I guarantees 100% of your savings)

How will the money be used?

The UK Government released the “Green Financing Framework” in June 2021 to introduce the rules surrounding where revenue raised via the Green Savings Bonds as well as the Green Sovereign Debt (‘Green Gilts’) can be spent [4].

The main draw of the Green Savings Bond is the fact that they will support green initiatives. Unlike other existing green bonds and financing, the revenue raised by the Green Savings Bonds does not have to fund a specific project (e.g. a wind farm). In fact they can take the form of “direct or indirect investment expenditures, subsidies, or tax foregone”.

Basically the revenue can be used by the government to help fund green schemes and initiatives (e.g. the Renewable Heating Incentive or sustainable research and development) as well as specific green projects (e.g. tree planting etc.). The UK government can even allocate up to 50% of the revenue to offset expenditures 1 year prior to issuance. i.e. they can use it to help fund the previous year’s budget.

It can be argued that investments in initiatives are better than just investing in individual projects since they have the ability to provide returns that are greater than the sum of the money invested. For example, investment in research and development may lead to new technologies and methods which accelerate us towards a zero carbon future.

However, the UK Government has already committed funding to many of these projects via traditional means. So if the Green Savings Bond’s revenue just supplants existing funding then there will be less benefit than if the revenue provides additional funds.

Where will the money be used?

The schemes, initiatives, and physical projects funded by the revenue raised by the Green Savings Bond fall into six categories, known as Eligible Green Expenditures.

Clean Transportation

  • Low and zero emission mobility

Renewable Energy

  • Renewable energy generation – wind, solar, hydrogen
  • Renewable heat use – heat networks, heat pumps, hydrogen heating
  • Energy storage systems
  • R&D for commercialising renewable energy technologies

Energy Efficiency

  • Energy efficiency programs in the commercial, public and industrial sectors
  • Residential energy efficiency programmes – heating, retrofit and insulation

Pollution Prevention and Control

  • Reduction of air emissions and greenhouse gas control
  • Waste prevention, reduction, recycling, and emission-efficient waste-to-energy

Living and Natural Resources

  • Protection and enhancement of terrestrial and marine biodiversity, ecosystems and natural capital
  • Sustainable land use and protection
  • Clean water, water storage, and wastewater system

Climate Change Adaptation

  • Flood protection
  • Data-driven climate monitoring
  • Technical consultancy dedicated to climate change adaptation

What will be excluded?

Although the UK Government believes that nuclear energy will play its part in getting to Net Zero, it has not included it in the list of Eligible Green Expenditures. The Government will continue to fund nuclear [5,6,7] but it will not be via this mechanism.

There are also four other broad exclusions to ensure no revenue will support:

  • Vehicles powered by fossil fuels or ethanol
  • Fossil fuel exploration and exploitation
  • Large hydroelectricity power schemes (>25MW, i.e. schemes that risk damaging ecosystems)
  • Weapons, tobacco, gaming, palm oil, or alcoholic beverage manufacture

Furthermore, any projects which fall foul of the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights will also be excluded.

How will Eligible Green Expenditures be selected?

The UK Treasury will lead the evaluation and analysis of potential projects and initiatives. This will be done in consultation with other government departments. The Treasury will compile lists of potential expenditures and present them to a cross-government group of representatives, the Inter-departmental Green Bond Board (IDGBB). The IDGBB will meet twice a year to aid on project selection and evaluation. It will also advise on updating any the rules, frameworks and guidelines. Ultimately, however, the power resides with HM Treasury, who chairs the IDGBB and with whom final decision-making lies.

Conclusion – Green Savings Bond

On the face of it the Green Savings Bond is a relatively secure and simple way to support the UK Government’s green ambition. It offers a one stop shop in which to invest is a range of different schemes all looking to improve our environment. However, as we have repeatably commented upon defining what is and what is not green takes a bit of time and forethought. 


  1. HM Treasury, 2021, Autumn Budget and Spending Review 2021
  2. NS&I, 2021, Green Saving
  3. NS&I, 2021, Green Savings Bonds
  4. HM Treasury, 2021, UK Government Green Financing Framework
  5. GOV.UK, 2021, Future funding for nuclear plants
  6. World Nuclear New, 2021, UK government adopts new financing model for nuclear projects
  7. New Civil Engineer, 2021, Government sets aside £1.7bn for Sizewell C nuclear plant

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Remember, the value of your investments may go down as well as up and you may not get back the value you initially invested.

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