How to approach your finances in an environmentally friendly way
If you do something good for the environment, you can save thousands on loans or mortgages and cut pennies off your insurance, while investing in “green” companies can make you profitable if you invest wisely.
Of course, financial gain is not what motivates you to reduce your carbon footprint or invest in green initiatives – but it is always worth seizing every opportunity to pocket money and a “green” loan or investment can get you certainly bring in this opportunity.
However, don’t let your enthusiasm for getting your hands on a green financial product or investment blind you to its weaknesses – you might be better off elsewhere. Which “green” products are now being offered by financial institutions – and is it worth using them?
1 Green Mortgage
There are great savings when you qualify for a green mortgage.
For example, you would save nearly $ 3,000 in the first five years of your mortgage if you qualified for a green mortgage with AIB – if you are a first-time buyer getting a $ 300,000 mortgage over 30 years and more than 80 percent of the loan absorbs the value of your home. After those five years, there could be more savings to be made – if discounted green mortgages are still available and you qualify for one.
AIB, Haven (a subsidiary of AIB) and the Bank of Ireland (BoI) offer green mortgages to those who buy or own energy efficient homes, and because these mortgages are discounted, they are cheaper than lenders’ standard home loans.
The interest rate for the green five-year fixed-rate mortgage from AIB ranges from 2.1 to 2.45 percent, depending on the loan value (LTV – percentage of the purchase price of the borrowed home).
Haven’s Green Mortgage (the cheapest fixed rate mortgage available from the lender) is a four year fixed rate home loan with an interest rate of 2.15 percent regardless of LTV.
BoI’s Green Mortgage gives you a 0.3 percent discount off the lender’s standard one, two, three, five, and ten year fixed rate mortgage rates. This 0.3 percent discount is also available on high-valued four- and seven-year mortgages (borrowing € 300,000 or more).
Ulster Bank also has a green mortgage despite the fact that it is currently pulling out of Ireland and is no longer accepting mortgage applications from new clients.
You can get a green mortgage with AIB, Haven or Bank of Ireland if you are buying or building a home with a building energy rating (BER – a measure of the energy efficiency of a house) of B3 or better. A valid BER certificate must be presented to your lender to prove that you are eligible for a green mortgage.
So far, green mortgages have only been available to those who take out fixed-rate mortgages. However, this has its drawbacks – You can lose a lender’s cashback offer if you get a fixed rate mortgage. For example, you cannot receive Haven’s € 5,000 cashback offer if you take up the lender’s four year green fixed rate. Likewise, you cannot take advantage of BoI’s 3-part cashback offer if you have a high quality fixed rate mortgage.
You can qualify for a green tariff as you top up your mortgage to make your home more energy efficient. For example, the AIB Green Mortgage is available for topping up the home loan – but you can only apply for the green interest if your home has achieved the correct BER rating.
However, be careful when adding your home mortgage: If your financial circumstances change in the future and you have difficulty paying back the larger mortgage, you could lose your home. While the interest rate on a top-up mortgage can be much lower than the interest rate on a personal loan, when you top up you increase the total interest you pay on your mortgage. Additionally, it usually makes more sense to repay a construction loan over up to about five years, rather than repaying it over 10 or more years (as might be the case with a top-up mortgage).
2 green credits
You could save thousands in interest by taking out a green loan – instead of a more expensive standard loan – to help finance the cost of upgrading your home. Green loans are usually cheaper than other loans that are offered by a lender.
Some of the cheapest “green” home loans are available from credit unions that are part of the CU Greener Homes program. Under this scheme, if your home improvement up your home’s energy efficiency to A (the best energy efficiency rating you can), you could borrow at 4.9 percent interest from your credit union.
AIB, BoI and An Post Money also offer green loans. The interest rate for the An Post green home improvement loan is between 4.9 and 12.9 percent, depending on the loan amount.
The interest rate for the AIB green personal loan is 6.25 percent; The interest rate on BoI’s green home improvement loan is 6.5 percent.
To qualify for a green loan, you need to use the money borrowed to reduce your carbon footprint. For example, to qualify for an AIB eco-friendly personal loan, you must spend at least 50 percent of your loan on an eco-friendly initiative like solar panels, a boiler upgrade, or attic insulation.
You will need to provide proof to your lender that a green upgrade is in progress. In the case of BoI, this can be a detailed offer or an invoice from a building owner for an energetic renovation. To qualify for the An Post Home Improvement Loan, you must receive an energy efficiency grant from the Sustainable Energy Authority of Ireland (SEAI).
3 Green Car Loans
Some of the cheapest green car loans – offered to electric or hybrid car buyers – are available through credit unions. For example, the Naomh Breandan Credit Union of Loughrea, Galway, charges 3.99 percent interest on their green car loans. This interest rate – which is much cheaper than the 7.2 percent interest rate on the credit union’s standard auto loans – applies to hybrid or electric cars.
Dublin’s Savvi Credit Union offers members who buy an electric or hybrid car a green car loan rate of 5.64 percent – much cheaper than the standard car loan rate of 8.29 percent.
Although An Post also offers ‘green’ car loans for those who borrow € 20,000 or more to buy an electric car, with an interest rate of between 8 and 14% (depending on the loan amount), these loans are more expensive than some of the others available on the market Car loans.
In order to get a green car loan, you will need to provide proof to your lender that you are buying an electric or hybrid drive. With the green car loan from Savvi Sparkasse, for example, you must present a copy of the vehicle registration document within four weeks of taking out the loan.
Don’t assume that “green” credit is cheaper than credit available elsewhere. Before opting for a loan, check the cost of personal loans offered by other lenders – even if those lenders don’t offer specific green loans. Avant Money, for example, offers some of the most affordable standard loans for individuals and home improvement stores – with interest rates starting at 6.1 percent. St. Raphael’s Garda Credit Union charges 5.06 percent interest on their standard car loans – which is cheaper than An Post Money’s green car loans.
4 insurance discounts
Your insurer may offer a discount on home insurance if you have an energy efficient home or discounted auto insurance if you have an electric car. For example, FBD offers a 20 percent discount on new home insurance if your home has a BER rating of B3 or better.
However, not all insurers offer green discounts. Also note that an insurer that does not offer a green discount may still be cheaper than one that does.
5 Green Investments
Record sums of money have been poured into green and environmental, social and governance (ESG) investments in recent years – and given the recent commitments at the C0P26 summit, that trend is likely to continue.
ESG investments focus on companies that have good social, environmental, and governance agendas. You could make money investing in ESG.
“You find that companies that incorporate a good social, government, and environmental agenda into their culture tend to be really well-run companies,” said Brian O’Reilly, director of market strategy at Mediolanum Asset Management. “In emerging markets, which tend to be less regulated, companies with a high ESG rank regularly tend to outperform. We see ESG as a company’s quality check. “
When the first green and ESG investments began to emerge, there was a cost of investing, according to Tara Doyle, a Matheson partner and chair of one of the Irish Funds Industry Association’s ESG working groups. However, this view is changing. “If you look at the evolution of the market and the ESG, if you invest in a sustainable business, [likely] Be a better investment in the long run as the business will likely still be around in the long run – as opposed to one that could have more in the short term [non-ESG] Gates.”
However, as with any investment, do your homework and avoid getting caught up in fads.
If you make the wrong investment decision, you could lose all of your money.