Each year you can invest up to £20,000 in an Individual Savings Account (ISA) tax free. With a Lifetime ISA (LISA) you can invest up to £4,000 and the government will add a 25 per cent bonus to your savings, up to a maximum of £1,000 per year (you need to be aged between 18 and 40 to open a LISA). The £4,000 will count towards your ISA allowance.
It might help to think of your Stocks and Shares ISA or LISA as a shopping basket and you get to choose which funds to put into it. Subscriptions for this year’s tax-free ISA allowance must be made before the end of this tax year, which is midnight on 5 April, 2021. Investments can be transferred from one fund into another and you can switch platforms too.
Using an ISA is a great way to invest and not have to pay tax on the gains made in any given year. Given the increased interest recently in climate change, there’s no reason your ISA investments can’t match your hopes for the future of the planet.
However, with seemingly endless opportunities to invest your allowance, it can be hard to know which fund or funds to pick. We asked Dzmitry Lipski, Head of Funds Research at interactive investor, which three green funds he likes the look of for your ISA or LISA.
The VT Gravis Clean Energy Income Fund invests primarily in companies that have significant involvement in the clean energy sector such as wind, solar and hydro.
Dzmitry says: “This is for investors seeking stable long-term dividend income, low volatility, capital protection and growth. Fund manager Will Argent has run the fund since it was launched in December 2017. More than half of the portfolio is invested in the UK. Among its top holdings are Greencoat UK Wind PLC, Renewables Infrastructure Group Ltd and Clearway Energy Inc. Its current yield is 3.6 per cent.”
This fund, the responsible version of Baillie Gifford’s Global Income Growth Fund, aims to grow your capital over the long term by investing responsibly in global equities (shares in companies). Its holdings – which do include large corporates such as Microsoft and Nestle – have all passed Baillie Gifford’s socially responsible investing criteria.
Dzmitry says: “The managers, James Dow and Toby Ross, exclude stocks in certain harmful industries such as tobacco and alcohol. They also follow the principles of the UN Global Compact, which covers areas such as human rights, labour, the environment and anti-corruption.
“Among the fund’s top holdings are big names such as Novo Nordisk, Procter & Gamble, Microsoft and Nestle. The fund is a compelling choice for those seeking a high and rising income from responsible equity investments. The fund is competitively priced with ongoing charge only 0.53 per cent and yielding over two per cent.”
The Climate Assets Fund from Quilter Cheviot focuses on investing in businesses that are working on solutions to some of the world’s biggest challenges – from climate change to resource scarcity and population shifts.
Dzmitry says: “This aims to deliver long-term growth and income through an actively-managed, multi-asset investment approach. Claudia Quiroz of Quilter Cheviot has managed this fund since 2010.
“The portfolio is invested in different asset classes, including global equities, bonds and alternative investments. Equity exposure is currently 65 per cent, bonds 15 per cent and alternatives 11 per cent. The fund sits in IA Mixed Investment with 40 per cent to 85 per cent shares and is suitable for investors who have a balanced risk appetite and are looking to invest in the growth markets of sustainability and environmental technologies, but with lower volatility of returns.”