Type: Guaranteed equity bond
Aim: Growth linked to the performance of the RBS Green index
Minimum-maximum investment: £2,500-£250,000
Term: Five years
Return: 100% of the growth in the index at the end of the term
Guarantee: Original capital returned in full regardless of the performance of the index
Closing date: July 21, 2008
Commission: Initial 3.25%
Tel: 0179 350 4414
This guaranteed equity bond gives investors exposure to businesses exploring alternative energy and other green initiatives through the RBS Green index over a five-year term.
The Ethical Partnership director Jeremy Newbegin thinks the obvious attraction of this product is the security of the 100 per cent money back guarantee. He feels this will attract cautious environmentally inclined investors and risk averse investors who are keen to join the green bandwagon.
“The fact that there are no charges as long as you keep the investment until maturity is obviously going to be palatable to potential investors. This is paid for, presumably, by the fact that no dividends are paid,” he says. He adds that as the index is global, investors are not reliant on one continent.
Turning to the less appealing features of the plan Newbegin says: “I don’t like the fact that there is no participation in dividends. This is the downside of not investing directly in equities.”
Newbegin would have preferred to see a lock-in of gains each year as a hedge against poor performance close to maturity.” He is also not keen on linking to an index, purely because there will be an equal weighting between the 30 biggest companies chosen by RBS that operate in green business sectors globally. He adds that no withdrawals are allowed during term of the account, which makes it inflexible for some investors.
“RBS will not independently verify information for inclusion in or for use in the calculation of the index. Being a fixed term, it will not be ideal if markets are poor in 2013. It could be argued that five years is no longer long enough to invest in equities,” he says.
Although the literature shows the top 10 companies in the RBS Green Index, Newbegin has found it very hard to find out about the other 20 companies. “There is no regular withdrawal facility so the product is only attractive to investors seeking growth,” he adds.
Considering which products may compete with this product Newbegin says: “There is no comparable competition and this is its strength.”
He observes that RBS was not in the original FTSE4Good index, but the bank has since been named as a leader among global companies for its substantive achievements in the management of social and environmental issues.
“Independent ratings agency Innovest has awarded RBS the highest possible rating – AAA – while the Carbon Disclosure Project has named RBS as a member of its Climate Disclosure Leaders index. It is one of only four banks globally to achieve a score of 95 per cent or higher,” he adds.
Suitability to market: Average
Investment strategy: Average
Adviser remuneration: Average