This article is from our Good ISA Guide 2022, which shows you how to invest your ISA for the good of people and planet as well as your own future.
So if you want a #NicerISA this year, where do you start?
1. Start with the everyday – your bank
If you’re keeping your money in cash, it makes sense to opt for a bank or provider that you know is aiming for a positive impact on the planet or society.
Who you choose for your everyday banking and savings can have a huge impact. Some of the main high street banks don’t have great records when it comes to the business sectors they invest in or lend their customers’ money to – often investing in deforestation, fossil fuels, armaments etc. Banks like Starling or Triodos, and Nationwide Building Society, offer much more climate-friendly accounts.
2. Money management apps
In recent years there’s been an increasing number of money management apps designed to get us all more engaged with our finances and at the same time make it easier for us to ‘do our bit’ when it comes to the environment or society.
Sugi helps you analyse the carbon impact of your current investments, compare investments and offset your portfolio. Chip and Plum rounds up any small change in your account and automatically moves it into a separate bank account which, over time, adds up. Moneybox does the same, and you can access its ‘Socially Responsible Investment’ options too.
3. Cash ISAs
Thanks to rocketing inflation, it’s pretty difficult to get a good return on Cash ISAs at the moment. However, they can offer some protection compared to investing in the potentially risker stock markets.
If you are sticking with cash, look for ethical or environmentally-friendly accounts with the likes of Ecology Building Society, Triodos Bank, Charity Bank or the Sharia- compliant accounts on offer with Gatehouse Bank. Platforms like Raisin also offer good rates on Sharia accounts.
4. Innovative Finance ISAs
If you’re looking for returns slightly above cash, but still don’t want to invest in equities, you could consider peer-to-peer investments or an Innovative Finance ISA (IFISA) with platforms such as Ethex, Energise Africa, Abundance Investments or Triodos Crowdfunding.
5. Investment platforms for ready-made portfolios
If you are investing without an adviser, there are a growing number of easy-to- use investment platforms, ‘robo-advisers’ and apps that offer ready-made green portfolios. These platforms allow you to invest in funds that pool investors’ money together to put into companies and sectors working to build a more sustainable future. Good With Money likes Simply EQ’s Positive Impact Portfolios, Clim8 Invest, Circa5000, Wealthify’s Ethical Plans and Moneybox’s Socially Responsible options.
Cushon started off as a workplace financial wellbeing service but now offers a range of options for individuals, including the Ethical CushonMix ready-made portfolios. We also like The Big Exchange from The Big Issue.
6. Responsible fund choices
Check out Good With Money’s regular Good Investment Review to see which funds get the highest green rating – you can also ask your IFA.
If you are self-selecting funds on a platform such as Hargreaves Lansdown or Interactive Investor, you may find it difficult to find out enough information on the underlying investments of the funds you have chosen. Starting with the fund factsheets is a good idea, but you could also consider some questions to ask to find out how green your fund really is:
Which companies does the fund invest in? Only revealing the Top 10 holdings is not enough – the firm should detail every sector and company the fund invests in, and why it does, or why not. What else do they invest in? Does the firm offer one or two ‘token’ sustainable funds amidst a sea of mainstream (=fossil fuels) funds or do they have proven depth and breadth in the sector?
How long has the investment firm or fund manager been managing money in sustainable sectors? Are they truly experienced or are they just hitching a ride on the bandwagon?
How engaged are they? Do they regularly vote on corporate issues that matter to you, challenging companies and maintaining a dialogue with them on tricky issues, or is there little evidence of this?
One consistently good performer is Liontrust. John Fleetwood, author of the Good Investment Review, said, ’When they launched the Liontrust Sustainable Funds European Growth fund 21 years ago, Liontrust had the foresight to invest in a substantive team of sustainable investment specialists long before it became fashionable. This early adoption has paid dividends in spades, with the Sustainable Future funds becoming a mainstay of the company’s products and having rewarded investors handsomely’.
7. Find an IFA
For ethical financial advisers, check out Pennine Wealth, BlueSphere, and Castlefield, among a growing number of others. You could also contact Path Financial after reading their ISA article in our Good ISA Guide.
Your capital is at risk, losses from investments are not covered by the Financial Services Compensation Scheme and past performance is not a guide to future performance. Tax treatment is dependent on individual circumstances and is subject to change.