Going green is nothing particularly new, but it is only in recent years that mainstream consumers and companies have really got behind efforts to improve the planet.
Whether it’s buying fair-trade goods, taking out a green mortgage, or investing in an eco-friendly investment fund, consumers are becoming more ethically in tune and realising the social and economic benefits of adopting a green stance in their daily lives.
While supermarkets have been keen to promote green products, from coffee to tuna, it is a relatively new niche in the finance world that a green approach is starting to take hold and in recent years a number of products including mortgages and investment funds focused on climate change and eco-conservation have entered the fray. This move has been as a result of a changing consumer psyche and has led to changes in various company structures to improve their green credentials, with the aim of lowering costs, and maximising profit potential while at the same time appealing to savvy borrowers and investors. This could be by adopting new technologies, such as those utilised by BMW and Porsche to reduce carbon emissions, or by committing to using recycled supplies as shown by Outukompu, a stainless steel provider.
Within the mortgage market over the past few years a number of product providers and brokers set up green initiatives, from pledges to plant a certain amount of trees for every mortgage taken out, to lenders promising to offset the equivalent of an average property’s carbon emission for each year of the mortgage promotional period. Other lenders will only lend on properties that fit their strict eco-friendly criteria, and although overall take up of ‘green mortgages’ has been slow, with borrowers more focused on rate, there is still a demand for this niche. Property programmes such as Grand Designs have also helped to boost interest in ‘green property’, while a government commitment to ‘eco-towns’ should also help to raise awareness of the various green housing initiatives.
Eco-towns
These eco-towns planned include the provision of between 5,000-20,000 carbon neutral properties built in each of the 10 proposed locations across the UK. These proposals have been put on hold to allow for a second consultation, but it is hoped that the towns will forge a community so that the average home should be within a 10-minute walk to frequent public transport and shops, which will help to reduce carbon emissions further.
A host of other organisations are investing in green philosophies throughout their business model to maximise opportunities and minimise the damage done to the planet, such as BG Group (formerly British Gas). BG Group has pledged to invest over 6 per cent of its annual profit towards more eco-friendly technologies and as businesses have realised the cost benefits of implementing green ideas, so have investors and customers.
There are a number of reasons why organisations have begun to take the issue of climate change more seriously. Perhaps most importantly it is an issue that is now at the forefront of the news agenda and consumer demand over the last five years or so has seen a marked rise in the desire for eco-friendly goods.
It has not gone unnoticed that consumers have become more aware and in tune with social and ecological causes over recent years. As concerns about the ozone layer, possible extinction of animals such as gorillas, polar bears and penguins and the emergence of ‘green events’ have been reported on the news more people have made changes to their lifestyle and shopping habits to promote ‘green living.’ It has been documented that consumers spent over half a billion pounds on fair-trade products in 2007, and although the credit crunch has dented confidence and peoples’ wallets, research from Virgin Money suggests that almost 80 per cent do not plan to make any changes to their eco-friendly shopping habits.
Green philosophies
The general public have over recent years become much more attuned to green philosophies as evidenced by the increased use of domestic wind turbines and solar panels for property. With over 80 per cent of people in the UK also undertaking paper or glass recycling, it is an issue dominating many peoples’ thinking.
And it isn’t just consumers looking to enhance their green credentials. Firms, whatever sector they are in can expect governments to come down hard on those that fail to implement green strategies, and give tax breaks to those that meet or exceed certain expectations. So from a cost perspective it makes sense to improve the way we all do business.
From an adviser perspective it is now more important than ever to look at borrowers’ spending habits, and with Virgin Money research showing that the majority of shoppers want to retain a ‘green-friendly’ approach to shopping, it is no surprise that firms are making changes to their own models to accommodate this. Sainsbury’s for example has pledged that it will reduce CO2 emissions per square metre by 25 per cent by 2012 against a 2004/05 baseline and confirmed that all of its online shopping deliveries will be delivered by electric vans by 2010. Shell has also pledged to increase its green commitment and has pledged that 1 per cent of its annual profit will be put towards ecological, sustainable technology solutions.
Despite the current market uncertainties, borrowers are becoming much more savvy about financial products and often log on to various websites to do some research before heading to a broker with a list of questions and possible products. The launch of various green, ethical and climate change funds has also given investors the opportunity to match their own philosophies. And with would-be property investors looking at alternatives as the housing market has dropped, people are returning to stocks and shares and investing in long-term strategies. A recent study into investor intentions indicated that advisers were keen to prompt their customers towards green and climate change opportunities, with close to 50 per cent of advisers suggesting that a green strategy should form part of an investor’s portfolio. Despite the economic uncertainties engulfing the UK, investors are still looking to make the most of attractive investment options - options that are becoming more readily available.
What is clear is that the financial services sector’s commitment to going green is set to be tested over the coming years by consumers eager to see improvements. Advising on products that fit outside the norm also shows a commitment and a drive to offer something different and of value, something that without asking, you may not have known the customer is interested in.
