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.
With Cash ISAs currently offering almost rock bottom interest rates and the pandemic causing the stock market to take a nose dive in the last year, you might want to consider that ISA wild card – the Innovative Finance ISA (IFISA).
An IFISA is a type of ISA that allows you to include investments that have been made via crowdfunded bonds or peer-to-peer loans. Within the IFISAs on offer, there are sustainable options aplenty.
As with any ISA, you can invest up to £20,000 per year without paying any tax on your returns or interest. IFISAs arguably offer an option that sits somewhere between the reliability of cash, and the potentially higher returns from investment in the stock market.
However, IFISAs are riskier than cash savings and can vary dramatically so make sure you read the risk description of the one you are interested in carefully. Unlike mainstream ISAs, they are not covered by the Financial Services Compensation Scheme (FSCS). You can also check out the best platforms for a green stocks and shares ISA before you decide.
Here, we round up the top platforms for to make your IFISA money green this year.
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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 only invests in renewable energy, fair trade, social housing, organic farming, green transport, or micro-finance schemes.
Ethex, a not-for-profit company, offers crowdfunding and peer-to-peer lending, which means you can invest directly in the projects that interest you. There is a detailed social and financial profile for each investment so you can choose the one that most closely matches your values.
Minimum investment amounts vary but can be as low as £1. Ethex investors can use its marketplace to trade eligible shares and bonds with others on the platform.
In 2017, Ethex partnered with crowdfunding platform Lendahand to form Energise Africa. The IFISA platform enables ordinary people to invest in bonds issued by solar firms, so they can provide pay-as-you-go solar power systems to low-income families in countries such as Kenya, Rwanda, the DRC and Tanzania.
Currently, Energise Africa is offering a bond offer to finance solar power for low-income families in the Democratic Republic of Congo (DRC). The three-year bond has a minimum investment of £50 and targets returns of 7.5 per cent. Every £250 invested will enable solar power company Altech Solar to provide a life-changing solar home system to a family that was previously off-grid in the DRC. The first £100 of capital invested by first-time investors is guaranteed.
Abundance, another Good With Money Good Egg firm, is a trailblazing renewable energy platform where you can invest in a wide range of green and social infrastructure projects through your IFISA from a minimum of just £5 in each.
This lets you easily diversify your holdings within an Abundance IFISA across a range of sectors, investment terms and risk levels. Most of the projects available for investment offer six-monthly cash returns, which are paid straight into the Abundance IFISA account. All its investments are direct; you choose the companies you fund, and you can see exactly how your money will be used to earn you a return. Abundance is also a B-Corp company. This means it has been assessed against a number of strict criteria including social and environmental performance, public transparency, and legal accountability to balance profit and purpose.
The Abundance marketplace lets you buy into any of its past investments. Although you should look to invest for the long-term, you can also use the marketplace to sell your investment to another buyer if you need to get your money back earlier than expected.
Downing Crowd has helped to make crowd bond investment more mainstream, raising more than £155 million since its launch just five years ago.
Similar to the Abundance site, the investor chooses the company bonds they want to invest in from those available on the platform at the time. Downing Crowd is currently offering an opportunity to earn a seven per cent fixed rate by lending to a 65-bed residential care home in the East Midlands. Interest is paid at the end of the term, which is a maximum of 24 months.
With Goji, which was founded in 2015, you can invest in bonds that fund renewable energy companies. Unlike other IFISA platforms listed here, you do not choose which company to invest in. Instead, Goji decides which renewable businesses to lend to. No information is provided on its website about which companies these are. It also has more strict criteria regarding who it will allow to invest in its products compared to other platforms. The minimum initial investment is £5,000.
Goji’s portfolio aims to provide returns of between six per cent, per year for three-year investments and 8.3 per cent, per year for five year investments. Returns made by investors can be eligible for support from Government subsidies that are paid on the energy generated by renewables.