Green mortgages, ESG funds and eco friendly credit cards. Green finance has gone from a niche thing that slightly earnest people talked about to something the big banks are actively pushing. Barclays, NatWest, Nationwide, they’ve all got green mortgage products now. ESG funds are everywhere. Even credit cards are getting in on it
Green Mortgages: What Are They and Are They Worth It?
A green mortgage is basically a mortgage that rewards you for having an energy efficient home. The more energy efficient your property, the better the deal you can get. Simple enough idea.
In practice it usually works like this. Lenders look at your property’s EPC rating, which is the Energy Performance Certificate a home needs when it is sold, rented out or built. If your home is rated A or B you can often access slightly lower interest rates or cashback deals that aren’t available on standard mortgages.
NatWest, Barclays and a handful of other lenders have been offering these for a few years now. The cashback deals in particular can be decent, sometimes a few hundred pounds towards energy improvements like insulation or a new boiler.
The honest reality though is that the interest rate difference is usually pretty small. We’re talking fractions of a percent in most cases. If your home already has a good EPC rating it’s worth shopping around and factoring green mortgages into your comparison. But I wouldn’t recommend ripping out a perfectly good kitchen to chase a slightly better rate.
Where it gets more interesting is if you’re buying a new build or doing significant renovations anyway. New builds tend to have A or B ratings as standard, so you’re in a good position to take advantage without having to do anything extra.
ESG Investing: Does It Actually Do Anything?
ESG stands for Environmental, Social and Governance. It’s a way of filtering investments based on how companies behave beyond just their profit margins. Do they pollute? How do they treat their workers? How is the company run?
ESG funds have exploded over the last few years. Virtually every major investment platform now offers them. The basic idea is that your money only goes into companies that meet certain ethical standards.
I’ll be honest with you, there’s a genuine debate about how much difference it actually makes. Some research suggests ESG funds perform just as well as standard funds over the long term. Other research is less convinced. And there’s a fair amount of what people call greenwashing, where funds market themselves as ESG while still holding some fairly questionable companies.
That said, if you want your investments to at least attempt to reflect your values, ESG funds are a reasonable way to do it. The main thing is to look past the label and actually check what’s in the fund. Some ESG funds still hold oil companies, for example, because those companies have made commitments to reduce emissions. Whether that counts depends on your own view.
Performance wise, the best ESG funds have done perfectly well. You’re not necessarily sacrificing returns to invest ethically, which wasn’t always the case a decade ago.
Green Credit Cards
These exist and some of them are quite clever. The basic model is that a portion of what you spend goes towards environmental projects, tree planting, ocean clean up, carbon offsetting, that sort of thing.
Some are made from recycled plastic or biodegradable materials rather than standard PVC. A few let you track the carbon footprint of your spending through an app.
They’re a nice idea but I’d apply the same logic here as anywhere else. Check the actual financial terms first. If a green card has worse cashback, a higher interest rate, or worse purchase protection than a standard card, the environmental benefit probably doesn’t make up for it financially. Look for one that’s competitive on the normal metrics and happens to have the green element on top.
Green Savings Accounts
A newer one this. Some banks now offer savings accounts where they commit to only lending your money to environmentally friendly projects, renewable energy, sustainable infrastructure, that kind of thing.
Triodos Bank is probably the most well known for this in the UK. They’re quite transparent about where the money actually goes, which I respect. Rates have been reasonable though you should compare them properly rather than just assuming you’re getting a fair deal because the bank sounds moral.
Is It All Just Marketing?
Partly, yes. Green finance has become a selling point and not every product that uses the label deserves it. Greenwashing is real and it’s worth being a bit sceptical.
But not all of it is cynical. Green mortgages do genuinely reward energy efficiency. Some ESG funds do genuinely screen out harmful industries. Some banks do genuinely direct savings into sustainable projects.
The way I look at it: if you can get a financial product that’s competitive on its own merits and also does something vaguely useful for the planet, why not. Just don’t let the green badge distract you from the basics. A bad financial product with a leaf on the logo is still a bad financial product.
This article is for informational and educational purposes only and does not constitute financial advice. Always do your own research and speak to a qualified financial adviser before making any investment decisions.
This article is part of our UK Investing Guide, where you will find every related article in one place.