The Government has been urged to introduce green Isas in the Budget next year, offering higher tax-free savings limits for investors in environmentally responsible funds or stocks and shares.
The calls were made by UK Sustainable Investment and Finance at a Parliamentary reception to mark National Ethical Investment Week this month.
Chancellor George Osborne first mooted the Gisa scheme in February 2008 and he continued to talk it up last year as the Tories sought to cement their green status ahead of the general election.
In a report from the Green Investment Bank Commission this June, it was suggested the Gisa allowance could be fixed at £5,000 higher than the allowance on stocks and shares Isas of £10,200.
To support its calls, UKSIF has claimed that a staggering 13 million people would be likely to invest in a green Isa in the next 12 months, based on YouGov research.
It also says half of current investors would consider investing in renewable energy to help the sector receive greater funding and meet the “urgent” demand for green energy investment.
UKSIF chief executive Penny Shepherd says: “We urge the Government to turn its words on green Isas into action and introduce a new allowance at the next Budget.
“We should build on the growing desire among consumers to make money and make a difference with their savings and investments.
“At the turn of the millennium, only the most far-sighted would have predicted today’s global and diverse responsible investment landscape. When we look back a decade from 2020, the difference should be even more dramatic.”
Several product providers are already marketing Gisas, despite the fact they are still subject to the same limits as conventional Isas, including Virgin Money, Aviva, Ecclesiastical and Jupiter.
Jupiter head of socially responsible investment Emma Howard Boyd led a working group that advised the Tories on how to make the Gisa concept a reality in November last year.
She says Osborne made a pledge to implement the schemes based on her report.
She says: “This would be an additional allowance to fund the low-carbon transition. I think the green Isa potentially addresses the ideas of both encouraging people to save and encouraging green investment.”
She says green investments can include companies specifically developing or selling low-carbon technology. However it can also include companies that are cutting their carbon footprints.
She adds Government calculations have previously suggested that an extra Isa allowance of £3,000 would cost the Treasury under £50m and an extra £5,000 would cost under £70m.
However, Bestinvest senior investment adviser Adrian Lowcock says launching a separate Gisa limit risks complicating the Isa format for investors.
He says: “It could create issues like can you transfer it into other Isas and that kind of thing. Perhaps it should be the underlying investment product that should be treated more fairly, for example a unit trust that invests in ethical areas should be treated more favourably tax-wise.”
A Virgin Money spokesman says even though the company sells its climate change fund as a Gisa product the group has no plans to broaden its offering in the area.
He says: “Anything that encourages people to save is a good thing. Should an ethical investment get higher Isa limits? Maybe. We offer our index-tracking Isas as well, so we have not focused on green Isas.”
AWD Chase de Vere head of communications Patrick Connolly says: “There is very limited demand for ethical investment. There are some clients that are keen but they are very much in the minority.
“If people are able to use their Isa allowance and potentially top up into an additional green Isa limit then that could increase demand. Or if they could put considerably more into a green Isa then that could also help.”