Keen to be green

By Jennifer Hill

London (Reuters): Gone are the days when the environment and business met only within the confines of organic carrot, hemp body-wash and recycled toilet rolls.

Eco-friendliness has hit the corporate mainstream and is increasingly being seen as a means of luring in customers.

Big brand retailers, technology giants and - perhaps more surprisingly - financial services firms are vying to capitalise on the burgeoning keen-to-be-green market. Under the government-backed 'We're in this together'-campaign, launched last week, eight leading companies have come together to fight global warming.

They aim to reduce carbon emissions in every household by at least one tonne over three years - a total 25 million tonnes.

Supermarket giant Tesco (TSCO) is halving the price of energy-saving light bulbs and home improvement chain B&Q is doing the same with its two best-selling insulation products.

BSkyB (BSY) is introducing technology that saves emissions by automatically switching inactive Sky boxes onto standby, while mobile operator O2 is paying a credit to customers who do not want a new handset when they renew their contract.

Financial firms are in the race for the green pound, too.

Financial companies

HSBC (HSBA) became the first big bank to commit to going carbon neutral in 2004. Barclays (BARC) achieved the same feat in the UK in March, while HBOS (HBOS) aims to be carbon neutral by the end of 2007.

Others, such as Royal & Sun Alliance (RSA) and Barclaycard - among the new corporate alliance, which also includes British Gas and Marks & Spencer (MKS) - have launched eco-products.

Bridget McIntyre, chief executive of Royal & Sun Alliance, says: "By offering consumers positive environmental choices, large companies can make a tangible difference in the fight against climate change."

But, while such initiatives might be kind on the environment, are they pleasing on the pocket?

Car insurance

Competitiveness, it seems, is an issue. Take car insurance, which is rapidly emerging as a key eco-finance battle-ground.

More Th>n, the direct retail arm of Royal & Sun Alliance, gives owners of eco-cars - hybrids, electric and alternative fuel vehicles - an insurance discount of up to 15%. For those with non-eco cars, it will pay to carbon offset their first 3,000 miles' driving. Rival CIS offsets 20% of customers' carbon emissions by investing in reforestation and renewable energy projects.

Other insurance policies offer schemes that help eco-minded consumers become greener drivers.

Although not specifically labelled green, Norwich Union's pay-as-you-drive motor insurance - launched in October last year - aims to reward those with limited mileage. The cost depends on when, where and how often motorists drive, determined by an in-car global positioning system (GPS).

In theory, less usage should mean lower carbon emissions - and lower insurance premiums.

More Th>n also plans to help drivers track their habits. Under a pilot scheme due later this year, it will give 1,000 customers a GPS device to measure anti-environmental behaviour, such as the number of short journeys taken, excessive speed, over-acceleration and idle time leaving the engine running.

Being an eco-conscious motorist will, of course, save money on running costs; the Energy Saving trust estimates that greener drivers can save an average £120 per year on fuel.

But eco-insurance could leave less green in your purse. Motorists are being stung with premiums of up to 44% more than market-leading standard policies, according to industry research. And, unless you are an exceptional case - a motorway-loving, low-mileage, off-peak driver - working out whether NU's pay-as-you-drive policy will save you money - or help the environment - can prove tricky.

Richard Mason, director of insurance at moneysupermarket, expects the green car insurance market to grow, but says providers must be more competitive.

Until then, drivers should opt for the cheapest deal that meets their needs and give the money saved to green causes.

"Not only will you have the peace of mind that your charity is receiving the money directly, but you will get value for money on your policy," he says.

Credit cards

The popularity of the green tag has also spread to home insurance and credit card offerings.

Lloyds TSB (LLOY) says it will insure wind turbines, solar panels and ground-source heating pumps for repair, replacement and theft at no extra cost on its buildings insurance policies, while More Th>n plans to offer a discount to home insurance customers who have taken measures to reduce their energy usage.

Virgin Money, meanwhile, is in the process of developing a biodegradable credit card, while Barclaycard will share proceeds of a new card, due to be introduced this summer, with carbon-reduction projects. It will donate £1 million to environmental initiatives in the first year, and 50% of profits from its Breathe-card, made from PETG - an environmentally friendly alternative to PVC cards - thereafter.

The new eco-card will have a typical annual percentage rate of 14.9%, but will charge a lower rate of 5.9% on purchases of environmentally-friendly goods and services - loft insulation or a public transport season ticket, for example.

"The main thing is that there's an incentive for people to buy less environmentally-intensive products," says a spokesman.

But, although its typical interest rate is below the market average, far better rates can be found: Barclaycard's own Simplicity-credit card has a best-buy rate of 6.8%.

Lisa Taylor, an analyst at moneyfacts, says: "Being seen to be green is fashionable at the moment, but more needs to be done before it really makes a true impact. Providers investing some of their huge profits in doing something worthwhile is certainly a step in the right direction. (But) anyone choosing a green product should weigh up the benefits against any cost implication - excessive rates, fees or missing out on interest-free deals."