The UK’s largest banks and investment platforms are failing to meet rising demand for responsible investment, according to a Good With Money investigation into stocks and shares ISAs.
Our investigation into the availability of responsible options for stocks and shares ISA investors concludes there is a woeful lack of information, access and transparency from mainstream providers.
Good With Money calls for:
- Positive discrimination towards Environmental Social Governance (ESG) information and funds that integrate ESG values on the biggest investment platforms;
- The addition of a “responsibility” category in the selection criteria on investment platforms. For example, “best performing responsible funds” or “most popular responsible stocks”, alongside other ways of helping investors choose which investments are right for them.
The UK’s largest banks and investment platforms don’t make it easy for those of us who want to invest our ISA allowance positively – any investors trying to invest their ISA responsibly via a big bank or platform would encounter a lack of access and a lack of transparency in their search.
Such challenges could mean that many investors who would invest responsibly do not currently, because there is too much hassle and too little information.
Our investigation found that there are no environmentally and socially responsible ready made ISA options offered by the big four high street banks or the biggest investment platforms. Any responsible ISA options that are available via investment platforms are not highlighted – an investor would need to know about the funds already before visiting the platform and search for them independently.
The research, kindly sponsored by Triodos Bank, the ethical provider, also found that for investors who choose ready-made ISA options, where the funds or stocks have already been selected for them, it can be almost impossible to discover which companies the ISA is ultimately invested in.
According to separate research by Triodos, 53% of ISA investors go to their high street bank, or to an investment platform for their stocks and shares ISA, a tax-free investment allowance of up to £15,240 per person. Around 27% of ISA investors want to know how their ISA is invested but just 10% of investors say there is enough information on ethical and sustainable investments.
We concluded that high street banks’ lack of transparency and lack of values-based options are unfair to the growing number of people who want to invest positively.
At a time when ethical investments are outperforming their non-ethical counterparts according to research from Moneyfacts, Good With Money urges investors not to just go with first deals offered to them by banks or platforms, but instead to consider where they want their ISA money to go this year, and whether a responsible fund could meet their financial needs as well as their values this year.
The research, conducted by Triodos for Good with Money, also found:
- 76% investors think banks should be more transparent about how customers’ investments are used
- Just 10% of investors say there is enough information on ethical and sustainable investments. 24% say financial services companies have a duty to provider better education on the ethical sector
- 22% of investors would be likely to invest ethically if it was more transparent and accessible
- 45% investors would move their money if they discovered it was invested in companies that did not match their values
- 25% investors plan to dis-invest from sectors that don’t match their values
- 23% investors think ethical investments produce better or similar returns than investments mainstream companies
Becky O’Connor, of Good With Money, says: “Most of us live our lives according to a set of values: recycling when we can, giving to charity, buying organic, local food where possible. But our money does not always reflect our efforts elsewhere. The lack of transparency from banks and investment providers means we are not aware of what our money is doing – and it suits them to keep it that way. Offering values-based options might be considered a major hassle for the big players, but as interest from customers rises, it is time they saw it as an opportunity and started to swim with the tide.”
Huw Davies, head of personal banking and investments at Triodos Bank says: ‘‘Often it’s far too hard for the average person to get to the bottom of what their stocks and shares ISAs are actually invested in. This opacity can hide all manner of companies, industries and activities which can contradict investors’ personal ethical preferences. They deserve to have clear and easily accessible information about where their money’s invested so they can judge for themselves, without having to jump through hoops to do so.”
John Ditchfield, of Castlefield, the ethical financial adviser, has suggested these three funds** as potential options for investors wanting their ISAs to be more responsible this year:
- Con Brio BEST Income Fund
- WHEB Sustainability fund
- Steward Investors’ (formerly First State) sustainability funds, particularly the Stewart Investors Global Emerging Markets fund
Join our campaign to get responsibility onto the mainstream investment agenda.
Don’t forget, you can download the GOOD guide to stocks and shares ISA investing in full. The guide gives traffic light responsibility ratings and a list of “snog, marry and avoid” stocks to be aware of when investing in your next ISA allowance.
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