Gatehouse Bank has recently launched a range of ‘green’ fixed-term savings and cash Isa accounts, many of which offer top rates.
With the issue of climate change increasingly on the agenda, many people are looking to make more sustainable choices – from recycled toilet paper to where to invest their money.
But it’s not always easy. A Which? Money investigation into ethical investing last year found jargon and unreliable data was making it very difficult for investors to find funds that aligned with their values.
Here, we take a closer look at Gatehouse Bank’s green accounts, and how they compare to other sustainable savings options.
What do Gatehouse Bank’s green accounts offer?
The collection of Green Saver accounts includes four fixed-term savings accounts and four fixed-term cash Isas, with terms of one, two, three and five years.
In fact, at the time of writing its five-year fixed-term deposit account offers 1.5% EPR, which is the highest rate of any fixed-term savings product currently on the market.
The table below shows how Gatehouse Bank’s accounts sit among the top rates for all fixed-term accounts, by order of term.
|Five-year fixed-term savings account||Gatehouse Bank Five-Year Fixed-Term Deposit||1.5% (EPR*)||£1,000 minimum initial deposit|
|Five-year fixed-term cash Isa||Gatehouse Bank Five-Year Fixed-Term Cash Isa||1.3% (EPR*)||£1,000 minimum initial deposit|
|Four-year fixed-term savings account||Punjab National Bank Four-Year Fixed-Term Deposit||1.15%||£100 minimum initial deposit. Must hold a savings or current account with the provider to open a fixed-term deposit account.|
|Four-year fixed-term cash Isa||Punjab National Bank Four-Year Fixed-Term Cash Isa||0.95%||£1,000 minimum initial deposit|
|Three-year fixed-term savings account||Gatehouse Bank Three-Year Fixed-Term Deposit||1.25% (EPR*)||£1,000 minimum initial deposit|
|Three-year fixed-term cash Isa||Gatehouse Bank Three-Year Fixed-Term Cash Isa||0.9% (EPR*)||£1,000 minimum initial deposit|
|Two-year fixed-term savings account||Punjab National Bank Two-Year Fixed-Term Deposit||1%||£100 minimum initial deposit. Must hold a savings or current account with the provider to open a fixed-term deposit account.|
|Two-year fixed-term cash Isa||Punjab National Bank Two-Year Fixed-Term Cash Isa||0.8%||£1,000 minimum initial deposit|
|One-year fixed-term savings account||Punjab National Bank One-Year Fixed-Term Deposit||0.9%||£100 minimum initial deposit. Must hold a savings or current account with the provider to open a fixed-term deposit account.|
|One-year fixed-term cash Isa||Punjab National Bank One-Year Fixed-Term Cash Isa||0.7%||£1,000 minimum initial deposit|
*Expected profit rate
Source: Moneyfacts. Correct as of 19 February 2021, but rates are subject to change.
As the table shows, the green Gatehouse Bank accounts hold the top spot in four categories. Its one-year fixed-rate bond (0.55% EPR) and cash Isa (0.45% EPR) as well as its two-year bond (0.77% EPR) and cash Isa (0.55% EPR) can all be beaten by other providers.
Note that Gatehouse Bank’s accounts are Sharia-compliant products, and so offer an expected profit rate (EPR) rather than an annual equivalent rate (AER). This means the advertised rates aren’t guaranteed, but we’ve never heard of an instance in the UK where an Islamic bank has not paid the expected rate.
- Find out more: Islamic finance and Sharia-compliant savings
How sustainable are these accounts?
For every fixed-term account that’s opened from its Green Saver range, Gatehouse Bank says a tree will automatically be planted, and the carbon credits will be registered on behalf of its customers.
Forest Carbon, a UK ecological company, will be responsible for planting the trees. These trees are certified by the Woodland Carbon Code, which means they will be protected long-term under UK law, are planted sustainably and demonstrate that the project offers additional carbon benefits.
This initiative comes in response to the Committee on Climate Change’s recommendation that around 30,000 hectares of new woodland should be planted in the UK each year until 2050 to offset residual greenhouse gas emissions.
In addition, the fact that Gatehouse Bank is an Islamic bank means it does not invest in companies that go against sharia principles. This includes firms involved with gambling, alcohol, tobacco and arms.
When we asked how Gatehouse Bank invests savers’ deposits, it told Which? the money is invested to fund property finance for home buyers, landlords and businesses.
What other ‘green’ savings options are there?
Several providers offer green or ‘green products, but what that means can vary. Here are a few to consider:
Earlier this month, Tandem Bank launched its Green Instant-Access Saver, paying 0.5% AER – this is a top-rate, which is also offered by a few other savings providers.
The provider, which began life as a credit card company when it first launched in February 2018, closed these products in November 2020. Since then, it’s pivoted to become what it’s calling ‘The Good Green Bank’.
It currently offers one, two and three-year fixed savings accounts, but the only ‘green’ account is its instant-access account. Tandem says deposits will be used to fund its ‘green mortgages’, which it says will focus on making UK homes more sustainable and environmentally friendly, but are not yet available.
It currently has a range of Green loans, but these are provided by Allium, which Tandem acquired in 2020.
Ecology Building Society
New customers can choose from an instant-access savings account, cash Isa or regular savers, and existing customers can also open a 90-day notice account.
While the rates aren’t market-leading (0.2% AER for an instant-access account), Ecology Building Society savers can rest assured that their deposits are used to fund properties and projects that it says ‘respect the environment and support sustainable communities’.
Triodos Bank offers a range of financial products, including an instant-access savings account and cash Isa, a regular saver and a one-year fixed-rate bond. The rates aren’t very competitive, with just 0.15% AER on its instant-access account, and 0.4% AER if you fix for a year.
However, it uses savers’ deposits to fund projects that it considers to ‘make a positive and lasting impact on society, culture or the environment’. It also publishes details of every organisation it funds on its website, so you can make sure it aligns with your values.
Ethical savings providers
Separate to green or sustainable savings options, ethical savings options tend to focus on more of a humanitarian or community focus, from helping charities to supporting businesses that operate for ‘social good’.
The Co-operative Bank
The Co-op Bank claims it was the first UK high-street bank to introduce a customer-led ethical policy, which has been shaped by over 320,000 customer responses since 1992.
For example, it does not provide banking services to organisations that conflict with its customers’ views on a range of issues such as human rights, the environment, international development and animal welfare, or those involved in irresponsible gambling or payday lending.
Accounts from The Co-operative Bank include instant-access online savers and cash Isas, with rates ranging between 0.9% to 0.15% AER, and set to be reduced further from 5 May 2021.
Its Britannia savings range includes one, two and three-year fixed-term accounts, offering 0.15% AER, 0.21% AER and 0.26% AER respectively. It’s one-year fixed-term cash Isa pays 0.15% AER, while its two-year fixed-term cash Isa pays 0.2% AER.
Charity Bank uses its savers’ deposits to make loans to charities and social enterprises. The organisations it currently supports include EVA Women’s Aid, Royal Society for Blind Children and Rotary & Residential Care Centres.
Accounts include a 33-day notice account that pays 0.35% AER, a one-year fixed-rate account offering 0.52% AER and a three-year fixed rate account paying 0.75% AER.
Oxbury Bank – AKA The Agricultural Bank – launched a range of savings accounts last month, all of which fund loans to support British farming businesses.
If that aligns with your interests, then you can earn up to 1.17% AER in a five-year bond. It’s also planning to launch a ‘Forest Saver’ account in the future, which it says will provide carbon mitigation.
Credit unions and mutuals
Credit unions and mutuals both work within smaller communities than big banks, which means they have fewer stakeholders and can support their members with loans and savings products.
Credit union members tend to have either a location or profession in common, whereas mutuals don’t necessarily have any restrictions – though some, like local building societies, will only serve customers who live in certain nearby areas.
These kinds of organisations aren’t automatically considered ‘ethical’, but they can be a good starting place if you know you want your money to benefit your community in some way.
- Find out more: credit unions explained
Should I switch to a sustainable savings account?
If you want to feel like your money is doing some good, then thinking carefully about where to save it can help make a difference – but choosing where to save it depends on your priorities.
Firstly, you should factor in what the account is offering you, as you shouldn’t have to punish yourself with an account that doesn’t suit you. What are the interest rates? Does the provider have a good customer service history? Can you manage the account in the way you’d like?
Secondly, what kind of positive change do you want to support? The terms ‘ethical’, ‘green’ and ‘sustainable’ are often used interchangeably but they can mean very different things. As the accounts above show, these claims can mean planting trees to support the environment, only investing in companies that do good, or supporting a local community.
Finally, it’s worth looking beyond the headline ethical claims to see what companies the provider invests in, and who it’s run by. Digging a little deeper can sometimes reveal links to companies that fund climate change, nuclear weapons producers, avoid their taxes or pay their executives excessively – all factors that consumer organisation Ethical Consumer counts as a company causing harm rather than good.