This is part of a new series from Good With Money on ‘How to green your ISA’, showing you how to make your tax-free ISA allowance work for the planet and people as well as your pocket.
An Individual Savings Account (ISA) is a type of investment (or cash savings account if you are going for the cash version) that shelters your returns from tax. With a stocks and shares ISA, you choose investments to hold in your ISA.
The great news is that many DIY investment platforms now offer ‘green’ options for stocks and shares ISAs. These pool investors’ money together to put into companies and projects that are working to solve the world’s most urgent problems and build a cleaner, more sustainable world. It means you can actively choose investments that are targeted to help with the issues you care about most.
You can invest up to £20,000 into an ISA each tax year, or up to £9,000 into a Junior ISA (JISA) on behalf of a child aged under 18. You can choose to use all of your allowance in a stocks and shares ISA or share it between different types, such as cash or Innovative Finance ISAs.
To get started, simply open an account online with the platform provider you want to invest with. Then choose the funds you want to put into your ISA.
Here are 10 platforms on which you can go green with your stocks and shares ISA:
Annual fee: 0.25 per cent
The Big Exchange, co-founded by The Big Issue, is an online investment platform which only lists funds that are proven to be making a positive difference to the planet and its people.
There are 4o + investment funds to choose from, all rated against the United Nations Sustainable Development Goals, or “Global Goals”, for the type and level of positive impact they’re making to people and planet. Each one is awarded a gold, silver or bronze medal, with gold having the highest ability to bring about positive change. You can choose funds that tackle the issues you care about most.
If you are keen to invest specifically in tackling climate change for example, The Big Exchange now offers the Multi-Asset Climate Fund (MACS Fund). This invests solely in companies that are actively working to help lower carbon emissions. To be included in the fund, they must get 50 per cent of their revenue from climate solutions.
You can invest on The Big Exchange from £25 a month or a lump sum of £100.
Annual fee: 0.4 per cent
BestInvest’s ‘Top Rated’ funds list includes 18 Environmental, Social and Governance (ESG) funds. Its sleek new investment search tool makes it easy to browse and filter all of the investments, and it offers some useful guides on sustainable investing and how to choose ethical funds. It is also well worth checking out BestInvest’s long-standing guide to underperforming funds: Spot the Dog.
BestInvest was named Best ISA Provider at the City of London Wealth Management Awards 2020.
Annual fee: £9.99 per month
Interactive Investor (ii) stands out for its flat fees, but whether this is good value for you personally will depend on how much you are investing in your ISA.
The ii site is clear and simple and boasts the “ACE 40”, which it says is the UK’s first rated list of ethical investments offering “a filtered selection of collective investment vehicles for all investors, new or experienced”. ACE stands for “Avoids Considers Embraces” and offers 140 ethical investments.
We all have different priorities – avoiding fossil fuels, strong corporate governance, treating workers fairly, avoiding tobacco – and the excellent tools on the ii platform will help pinpoint what you are looking for.
You can invest from £25 per month or any lump sum.
Annual fee: 0.45 per cent
Hargreaves Lansdown, or HL, is a stalwart brand and the biggest DIY platform in the UK for personal investors. You can start investing with just £100 or £25 per month.
HL is beginning to make sustainable investment a bigger part of its offering, relaunching its Wealth Shortlist in June 2020 to include responsible funds for the first time. The list is made up of funds chosen by experts as having the greatest potential to financially outperform their peers over the long term.
There are currently three funds in the ‘Responsible Funds’ category, which are Kames Ethical Equity, BNY Mellon Sustainable Real Return and Legal & General Future World ESG Developed Index.
HL has produced its own guide to ESG investing and says the proportion of its clients with at least one responsible investment fund in their portfolio has doubled over the five years to 2020.
Annual fee: 0.7 per cent
Nutmeg, one of the UK’s biggest robo-advisers, offers a range of ten fully managed ‘socially responsible’ investment portfolios for your ISA that invest according to ethical principles.
Using an environmental, social and governance (ESG) screen devised by global market aggregator MSCI, each portfolio carries a score indicating how ethical or ‘socially responsible’ it is, ranging from one for the least to 10 for the most responsible.
Unlike sustainable or impact investment funds that target specific outcomes – for example a reduction in Co2 emissions via a clean energy investment – Nutmeg’s portfolios invest in main markets using the MSCI screen to filter out companies that do not meet its criteria.
The portfolios will have two baseline exclusions: tobacco and controversial weapons, including nuclear and chemical. Other areas including mainstream arms, fossil fuels, mining and alcohol are also included.
You can invest from £500.
Annual fee: 0.6 per cent
Wealthify is a UK-based robo-advisor which invests in Exchange-Traded Funds (ETFs) to keep investors’ costs low. Like Nutmeg, it uses an automated process to create portfolios to suit a client’s appetite for risk. In June 2020, Wealthify became a wholly-owned subsidiary of the Aviva group, although it continues to be independently run. You can invest in a Wealthify stocks and shares ISA from just £1.
When you sign up, you can choose one the ‘Ethical plan’. This aims to avoid companies involved in activities that are harmful to society and the environment and instead proactively investing in companies that are committed to making a positive impact through their environmental, social and governance (ESG) practices.
Best Innovative Finance ISAs (IFISAs):
Annual fee: none
Good Egg company Abundance is a niche platform focusing on peer-to-peer lending for businesses and councils that are developing green infrastructure to help combat climate change. The Abundance ISA is an Innovative Finance ISA (IF ISA) – this is a way of holding a range of alternative finance products in a tax-free wrapper.
Minimum investment varies, but starts at £5. Typically, returns on crowdfunding sites like Abundance are higher than on traditional investment platforms but that comes with higher risk such as the infrastructure project or business struggling or failing.
Annual fee: none
Good With Money ‘Good Egg’ company Ethex is an innovator in the platform space and is designed specifically for people wanting to do good with their money. It offers crowdfunding and peer-to-peer lending, which means you can invest directly in projects such as affordable housing. Like Abundance, it offers an Innovative Finance ISA. Minimum investment amounts vary but can be as low as £1. Ethex investors can use a marketplace to trade eligible shares and bonds with others on the platform.
Annual fee: none
Annual fee: 0.6 per cent
Annual fee: £12 (£1 per month)
CIRCA5000 is a mobile-only app that allows you to invest in companies that are aiming to solve social and environmental issues around the world. It is designed to make investing easy and accessible to everyone, including those with zero experience of investing.
You can put your cash into companies from three separate themes – climate change, equality and disruptive technology – or a combination of all three, at a risk level you feel comfortable with. Minimum investment is £5.
For more information on CIRCA5000, see our full review.