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Posted - 16 July 2007 : 09:58:43
The bandwagon comes in various hues of green
It is now possible to pay for your organic food with a green credit card, to live in the tree house of your dreams thanks to green mortgages, and put all your hard-won lucre from saving the planet into a green bank account.
Extreme, perhaps, but recently launched financial products now make it very easy for savers and spenders alike to feel they are doing their bit for the environment.
Whether or not this is really the case has been questioned, however, with cynics suggesting that green products are as much an exercise in hype as last week’s Live Earth concerts.
“Some of the products being launched are a bit dubious”, says a spokeswoman at the Ecology Building Society, a niche specialist in environmental financial services.
“Unfortunately, there is nothing to stop people calling things green so it has been taken to mean a whole lot of things.”
Ecology Building Society is a provider of financial services that are undeniably green – it only provides mortgages on properties that have an ecological benefit for example, while savings go to providing these mortgages.
While it is happy that the green market is expanding, the bank is worried that the label is being used merely as a marketing tool. Every week seems to see the launch of a new “green” financial service, the spokeswoman says.
Last week, Barclaycard launched the Breathe credit card, which pledges to invest 50 per cent of profit into carbon reduction initiatives as well as offering discounts with retailers and utility suppliers.
Offering an interest rate of 14.9 per cent, the card is competitive but far from being among the best. A spokeswoman for Moneyfacts, the comparison website, says consumers should instead save the card charges by choosing a better interest rate and plough the proceeds into a green charity of their own choice.
“Customers can’t be bothered to do this,” argues a Barclaycard spokesman. “We are responding to our customer requests to make it easier to address green issues.”
Other banks and building societies are expected to follow suit with rival products, suggesting that “seen to be green” is perhaps as important as any other product or marketing initiative.
Research shows there is demand for products perceived as helping the environment as well as the back pocket. A survey conducted for the FT by Interactive Investor of its customers found that 46 per cent of retail investors would take a company’s green or ethical credentials into account when using them.
According to a Which? survey last month, 40 per cent of customers questioned said they would accept a lower interest rate on their current accounts if they thought their money was going to ethical and green causes.
But while consumer intent has been there, Stephen Hine, head of international relations at Ethical Investment Research Services, says that until recently the choice of mainstream products has been missing.
With the introduction of more products in the area, Hine says, the problem has become defining what constitutes green financial services. He says definitions can range from a “dark green” – for example, products from the Ecology Building Society – to a “light green”, which could include the new Barclaycard.
“Investors place different emphasis on how important green issues are and have a range of options to choose from,” says Hine.
More bank accounts have also been recently branded green, with HSBC saying last week that it is giving the option for customers to choose a green account.
Critics have said that the bank fails to meet the same level of ethical investing as others already in the market.
The Co-op’s account is seen as “mid-green”, for example, as it won’t invest in companies that have a bad track record, while Triodos Bank only tries to lend to companies that are directly involved in ethical activities, and so can be classed as “dark green”.
The HSBC account, by comparison, makes no claims to ethical investment of customer’s money. Instead, HSBC has pledged to pay £5 to environmental causes for each current account customer who moves to a paperless account.
The spokeswoman for Moneyfacts, which this week is to launch a section of its website devoted to green personal finance products, says paperless accounts are already open to many internet bank users.
Moneyfacts regards only three companies as truly green: the Co-op, Triodos Bank and the Ecology Building Society.
Moneyfacts says the personal finance market has lagged behind the investment market, where there are now hundreds of funds that offer a range of ethical and green options.
But the sector is already starting to suffer from “green wash”, says the spokeswoman.
“We think that most companies are just using the green badge as a marketing ploy.”
She points to the pledge by Britannia Building Society of planting a tree for every child whose parents open a savings account for them. This is very gimmicky, she says.
She agrees that the lack of a set definition for green products has made it easy for companies to claim to be helping the environment.
She also says that it makes ranking products difficult. For example, she says, Norwich & Peterborough offers to plant 40 trees for every one of its “carbon neutral” mortgages, while Giraffe launched a mortgage in May that aims to offset an average home’s carbon emissions by buying carbon credits during a promotional period. She asks: “Which is better?”
A Co-op spokesman says that it is easy to get too hung up about exactly what green benefits each product provides. He says that most customers are still more concerned with the financial package.
“Dark green investors are a minority so products along these lines are not workable. It needs to be an attractive proposition that stands on its own in the market,” he says.
He says products from the bank and its online brand Smile often crop up in best-buy tables, regardless of green credentials. For example, he says the Smile current account was voted the best by a recent Consumer Association survey.
Even so, the spokesman said the bank still regarded itself as the only mainstream UK bank with an ethical basis, and warned that those seeking to benefit from the image of being green will lose out in the longer term.
“Green is clearly the new black but companies will need to follow through to show these aren’t just gimmicks as jumping on a bandwagon never looks that good,” he says.
Source: ft.com
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