Ethical and green savings: how they work

A green or ethical savings account is, in almost every respect, an ordinary savings account: your money is deposited with a bank or building society, it earns a return, and it is protected by the same rules as any other deposit. What makes it different is what the provider says it does with the money. NS&I's Green Savings Bonds send your money to HM Treasury, which plans to allocate an amount equivalent to the proceeds to its chosen green projects within two years¹. Gatehouse Bank plants a tree in a certified UK woodland project for every Woodland Saver account opened or renewed². SBI UK offers a Green Fixed Deposit for terms of three and five years³.

The label "green" or "ethical" is not a regulated guarantee of environmental benefit in the way that, say, FSCS protection is a regulated guarantee of compensation. It is a description of the provider's own commitments, and those commitments vary widely: some providers exclude whole industries, some fund specific projects, and some simply market an ordinary account with an environmental theme. This page explains what the main UK green savings products actually promise, what they pay, who can open them, and how to check whether a claim is backed by anything.

How banks say they use green deposits

The most explicit example of a green deposit in the UK is NS&I's Green Savings Bonds. NS&I states that money invested in Green Savings Bonds goes to HM Treasury and is held in a general account, and that HM Treasury then plans to allocate an amount equivalent to the proceeds raised to its chosen green projects, within two years¹. The bond's brochure puts the same point plainly: "your money will go to HM Treasury, who intends to use it to help finance green spending projects chosen by the Government"⁷.

Two things about that arrangement are worth noticing. First, the money is not ring-fenced in a separate green fund: it sits in a general Treasury account with other government money, and what is "allocated" is an equivalent amount, not your actual pounds. Second, the definition of what counts as green can change. Under the Government's new Green Financing Framework of November 2025, the Government now plans to use some of the money raised through Green Savings Bonds to help fund nuclear energy projects⁴. Someone who bought the bonds expecting only renewable energy or conservation projects may find the scope has widened.

Other providers take different approaches. Islamic banks such as Gatehouse Bank describe what they will not do with deposits: Sharia-compliant accounts avoid investing in businesses providing goods or services such as alcohol, tobacco or gambling⁸. Building societies and ethical specialists may lend deposits against their own mission, such as sustainable housing. The common thread is that the commitment lives in the provider's own policy documents rather than in a single regulated definition of "green savings".

That is also true of the wider ethical finance market. Which? notes that every fund and investment trust using language implying ethical credentials has to supply a "sustainability factsheet" setting out their objectives, approach and metrics, and that the requirements for using the term "ESG" are not as strict as they are for "sustainable", so a fund using it could mean multiple things⁹. The same caution applies to savings accounts: the word on the label tells you the provider wants to attract ethical savers, but only the provider's published policy tells you what it actually does.

Tree planting schemes and the Woodland Carbon Code

Some green savings accounts attach a tangible environmental benefit to each account. Gatehouse Bank's Woodland Saver accounts plant one tree in a certified UK woodland project for every account opened or renewed, at no cost to the customer². The bank's key product information describes the mechanism in more detail: the planting is delivered via Pending Issuance Units from Woodland Carbon Code validated projects, through its planting partner Forest Carbon¹⁰.

The certification is what separates a verifiable claim from a marketing promise. Gatehouse Bank states that its tree planting scheme is certified by the UK Government Woodland Carbon Code, "which gives assurance that the planting is genuine new woodland creation and that the claimed benefits will be delivered"¹¹. The Code certifies projects in areas like biodiversity, "additionality", risk management and carbon capture measurement, and the projects are registered on the publicly available UK Land Carbon Registry, where they will be independently verified over the long term to establish carbon dioxide capture¹¹. The Woodland Carbon Code itself delivers externally verified projects, certified by UKAS accredited bodies to ISO standards, and each project developed under the Code is registered with the independent Markit Registry².

For a saver, the practical points are these. The tree is planted by the provider, not by you, so you cannot choose where or what species. Gatehouse Bank says your tree will be planted in one of nine specific UK woodland projects², while its five year Woodland Saver key information refers to four specific projects via Forest Carbon¹⁰, so the project list changes over time. And the benefit is attached to the account, not to the balance: opening a £1,000 account and a £100,000 account each result in one tree. If the environmental outcome is the main reason for choosing the account, the Code's public registry is the place to verify it.

Green fixed-term savers: terms from six months to five years

Most green savings accounts in the UK are fixed-term products, where money is locked away for a set period in return for a known return. The terms currently on offer cluster at the longer end:

Access during the term is restricted, and in some cases impossible. NS&I's brochure is blunt: "The Bond is designed to be held for the whole term. You can't cash it in before the end of the term"⁷. Gatehouse Bank's five year Woodland Saver states that withdrawals are not allowed during the term of the account¹⁰. SBI UK is slightly more flexible but gives no promise: early withdrawal requests are accepted at the bank's discretion, may be subject to a penalty, and may result in no interest being paid¹⁵. SBI UK also states you cannot add additional amounts to a Green Fixed Term Deposit during the term³.

What happens at the end of the term differs between providers, and it is worth knowing before you open one. SBI UK requires maturity instructions in writing at least 15 working days before the maturity date; in the absence of instructions, the deposit is renewed into another Fixed Deposit with a similar term³. Gatehouse Bank transfers the money into an Easy Access account if it receives no maturity instructions by the maturity date¹⁰. Under FCA rules, a firm should provide notice of the expiry of a fixed term in good time before the end of the term, explaining the consequences of expiry and the options available for dealing with the balance¹⁶. The dedicated guides to fixed-rate bonds and what happens when a fixed-rate account matures cover these mechanics in detail.

Profit and interest: how returns are paid and what £1,000 or £10,000 could grow to

Green savings accounts pay returns in the same two ways as any other account: interest, or an expected profit rate (covered in the next section). How the return is paid matters for both your cash flow and your tax bill. SBI UK calculates interest on its Green Fixed Deposit annually and compounds it, paying it either on each anniversary of the deposit or at maturity; for one year terms, interest is paid at maturity³. NS&I's Green Savings Bonds pay their interest at the end of the term, which has a tax consequence explained below.

Providers publish illustrative balances to show what a deposit could grow to. Gatehouse Bank's five year Woodland Saver gives an estimated balance of £1,210.81 at the end of the term on a £1,000 deposit, with no withdrawals or further deposits and profit paid annually¹⁰. SBI UK's illustrations show £10,000 growing to £11,329.96 over a three year term and £12,372.64 over a five year term³. These are the providers' own examples for their own products, based on their current rates, not a forecast of what green savings in general will pay.

For context on how savings interest builds, independent examples show the effect of rate and time. Which? calculates that £20,000 saved at 1% for 25 years would earn £5,678 in interest, while £5,000 on the same terms would earn £1,419¹⁸. Regular savers build more slowly than their headline rate suggests: £100 a month for 12 months at 6% earns around £34, because the balance builds gradually rather than being in place from the start¹⁹. The guide to compound interest explains how these figures work.

Tax is the part many savers get wrong. Interest on savings is usually paid gross, meaning tax is not automatically deducted before it is paid²⁰. Most people can earn up to £1,000 in savings interest before paying tax²¹, and the personal savings allowance lets basic rate taxpayers earn up to £1,000 a year tax free while higher rate taxpayers get £500²². People on low incomes may also qualify for the starting rate for savings, which allows up to £5,000 of savings interest tax free²⁴. If you earn more than £10,000 in savings interest, you must declare it on a self-assessment tax return²⁵, and earning £10,000 or more from savings interest or investment income is one of the reasons a self-assessment tax return may be required²⁶.

NS&I Green Savings Bonds have a specific tax quirk: the interest is taxable and counts towards your Personal Savings Allowance in the tax year the bond matures⁴. Because a three year bond pays all its interest in a single year, a large holding could push the interest over your allowance in that year, even if smaller annual amounts would not have. The guides to tax on savings interest and the personal savings allowance cover this, and a cash ISA avoids the problem altogether, though Gatehouse Bank's Woodland Cash ISA pays an expected profit rate rather than interest.

Sharia-compliant green savings: expected profit rather than interest

Several of the UK's green savings accounts come from Islamic banks, and they work on a different principle from conventional interest. Instead of paying an annual equivalent rate (AER) of interest, Sharia-compliant accounts pay an "Expected Profit Rate" (EPR), reflecting that the bank invests deposits in line with Islamic principles and shares the profit⁸. The key word is "expected": the rate is only a target and is therefore not guaranteed⁸.

In practice, the risk of receiving less than the advertised rate is low but real. Gatehouse Bank's key product information states that while it has, so far, never failed to return the expected profit advertised, in rare instances it could be unable to achieve it¹⁰. A saver comparing a Sharia-compliant account with a conventional one is therefore comparing a target with a contractual rate.

The ethical dimension of these accounts is explicit. Providers of Sharia-compliant accounts will not invest in businesses that provide goods or services such as alcohol, tobacco or gambling, as these are against Islamic principles⁸. The accounts are open to everyone: anyone can open a Sharia-compliant account with an Islamic bank, regardless of their religious beliefs⁸. This is a sizable market: when Which? analysed Moneyfacts data in September 2026, there were 71 savings and cash Isa accounts registered as Sharia-compliant, of which 14 were cash Isas, 46 were fixed-rate savings accounts and 11 were variable-rate savings accounts²⁷.

Who can open one and how to apply

Eligibility rules for green savings accounts follow the same pattern as other savings products, with a few provider-specific conditions.

• NS&I Green Savings Bonds: you must invest at least £100, paid by a debit card in your own name, issued by a UK bank⁴. You can cash in online without having to create an NS&I account, though you will need your NS&I or account number and bank account details²⁹.
• Gatehouse Bank Woodland Savers: you must be a UK resident aged 18 or over¹⁰. You apply online, and you can have up to two joint account holders¹⁰. Funding is by bank transfer or cheque, only from your nominated account¹⁰, and you manage the account via the bank's Savings App or Online Savings Portal¹³.
• SBI UK Green Fixed Deposit: you must be aged 18 or over, resident in the UK for tax purposes, have a permanent UK address, and hold an SBI UK instant savings or current account³. Access is in branch, by post or online³.

Note that SBI UK's requirement to hold another account with the bank is a genuine restriction that not all providers impose, so check before applying. When you open a savings account other than an instant access account, you will be given less detailed information than for other types, possibly in a summary box to help compare accounts³⁰. The guide to opening a savings account covers the process generally, and reading a summary box explains what each line means.

Joint applications are possible with some green accounts but not others. Gatehouse Bank allows up to two joint account holders on its fixed term Woodland Savers¹⁰, while the Ethical Cash ISA from Wesleyan must be opened in your own name and cannot be opened jointly³¹. A joint account links your finances with the other holder: MoneyHelper advises only opening one with someone you trust, as it could damage your credit score if the other person has poor credit, and you could be responsible if they run up debt³². In Scotland, money in a joint savings account opened during a marriage or civil partnership belongs to the account holders equally, though if you can prove you paid in more, you might be able to claim more³⁴.

FSCS protection for green savings

Green and ethical savings accounts carry exactly the same deposit protection as ordinary ones. The Financial Services Compensation Scheme protects eligible deposits up to £120,000 per person, per institution, a limit that rose from £85,000 on 1 December 2025⁵. Before that date, savings were protected up to £85,000 per person, per institution³⁵.

Both main providers named on this page state that their accounts are covered. Gatehouse Bank's key product information confirms that eligible deposits are protected by the FSCS¹⁰, and all of the Islamic banks currently offering Sharia-compliant accounts are covered by the scheme⁸. The Ethical Cash ISA from Wesleyan likewise states that savings in it are protected under the FSCS³¹.

The limit applies per person, per banking licence, not per account or per brand. If you hold money in several accounts that sit under the same licence, the balances count together towards the single £120,000 limit. The guides to how FSCS protection works, joint accounts and FSCS and money above the FSCS limit cover the details.

Cooling-off rights also differ by provider. NS&I Green Savings Bonds can be cancelled within 30 days of receiving confirmation of the bond⁷, while Gatehouse Bank gives a 14-calendar day cooling-off period on all its savings accounts, starting from the day the account is funded¹⁰. The guide to cooling-off periods on savings accounts explains what a cooling-off period does and does not undo.

Checking a green or ethical claim

Because "green" and "ethical" are marketing terms on savings accounts rather than regulated categories, the burden of checking falls on the saver. There are four practical tests.

First, look for external certification. Gatehouse Bank's tree planting is certified by the UK Government's Woodland Carbon Code, with projects registered on the public UK Land Carbon Registry and verified by UKAS accredited bodies to ISO standards². A claim backed by a government code and a public registry is checkable; a claim backed only by the provider's own website is not.

Second, read what the provider says it will not do with deposits. Sharia-compliant banks publish exclusions, such as alcohol, tobacco and gambling⁸. NS&I publishes where the money goes and what it will be allocated to¹. If a provider cannot state plainly which industries are excluded or which projects are funded, the label may be doing more work than the policy.

Third, watch for loose language. Which? notes that the requirements for using the term "ESG" are not as strict as for "sustainable", so a product using it could mean multiple things⁹. In the funds world, the ACE40 classification distinguishes funds that "avoid" certain industries like mining or tobacco, "consider" ESG factors, or "embrace" companies focused on positive social or environmental impact⁹. The same spectrum exists in savings: an account that merely "considers" environmental factors is a weaker claim than one that funds certified projects.

Fourth, separate the green claim from the financial one. Ethical funds have in recent years lagged relative to other funds because of spikes in oil prices that benefited energy companies³⁶, and US ethical funds marked their 10th consecutive quarter of withdrawals in early 2025³⁷. Those are investment market facts, not savings facts, but they illustrate the general point: a product's ethical credentials and its returns are two separate questions, and each should be checked on its own. For savings accounts, the return is a known figure in the summary box, and the ethical claim is whatever the provider's policy documents say it is.

If you want free, impartial help comparing accounts or working out what a green claim means for you, MoneyHelper is the government-backed service for that, and the savings section of this site explains every account type in plain terms.