Green finance - A Breath of fresh air? Or hot air?

No matter what you thought of last week's budget, there's one thing you must have noticed - it was coloured green. Gordon Brown, the Chancellor, introduced a number of green measures such as cutting stamp duty on zero-rated carbon homes - even though there aren't any as yet - and increasing road tax on 4x4s. He also called on lenders to introduce more green finance.

Lenders such as Abbey and HSBC were quick to state they would be bringing out green loan products shortly, to help people install equipment that improves their home energy efficiency rating and reduces their impact on the environment. But what exactly is green finance and does it mean we'll have to grow our own organic vegetables and have landscaped roof gardens? Hopefully not!

The real truth

In fact, there's no real definition as to what green finance and green mortgages are. What it's really about is CO2 (carbon dioxide) emissions, a greenhouse gas said to be damaging to the environment. The government has set a target to reduce CO2 emissions by 60% by 2050 and aims to achieve this by encouraging individuals and businesses to make more efficient use of fossil fuels. To persuade us to take more care with our carbon footprint, many banks and building societies hope to be leaders in the green revolution and will be bringing out verdant loans and mortgages - hopefully with incentives to encourage us to improve our home energy efficiency. Whether they'll offer value for money is another matter.

Of course, it's difficult to compare mortgages because of arrangement fees, cash backs and exit charges, but on the whole, looking at interest rates alone, green mortgages and savings are unlikely to be the hottest on the market. Many expect these eco offerings to be standard products with a green spin or a green fashion accessory attached to them such as a tree planted on your behalf.

Not entirely new

The Ecology Building Society, set up in 1981, was at the forefront of the green revolution. And long before the others. It offers ethical savings accounts starting from 2.1% on its instant access account - the difference with its mortgages being that the green element isn't an add on. Indeed, it only lends on properties that have an environmental perspective, that is, they are new with the latest energy saving features or are old and derelict and are being renovated or converted, which is classed as recycling by the society.