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.
As you’re reading this guide to ISAs, it’s likely that you’re already aware of the potential financial benefits of saving or investing within an ISA. But do you know that the money in your ISA can be doing much more? In fact, your ISA allowance can be a powerful weapon in the fight against climate change, but it could also be funding activities that are harmful to the planet.
We want to help more people understand the power of their money and learn how the funds sitting within your tax-efficient ISA accounts could even be working towards helping us achieve our net zero goals!
Why net zero?
Last year, just before the much-anticipated COP26 Climate Summit was hosted in Glasgow, the UK government published its ‘Build back greener’ strategy document, outlining the ways we will meet our 2050 net zero commitments.
The 400-page report highlights the importance of action on climate change, setting out key government policies designed to help us reach our climate goals, such as ending sales of petrol and diesel cars and a transition to green energy. However, there’s a consensus that the report does not go far enough and we have yet to see any positive action from the government to put the policies into action.
The power of individual action
In the face of government inactivity, many of us are looking at actions we can take at an individual and local level to create a greener future. Alongside moves like choosing more sustainable food, switching to electric vehicles and reducing energy usage, people across the UK are also recognising the power of their money to create a real positive impact on the planet and its people.
So when you’re looking for a way to take advantage of your annual ISA allowance, you should also consider how investing in an Innovative Finance ISA could have the added impact of accelerating us towards our net zero targets.
Is it really green?
But how can you tell if your ISA fund is doing good? Unfortunately, when you invest in an ISA with one of the UK’s ‘big banks’, you could be unwittingly be funding activities you’re personally opposed to. Despite the UK’s commitment to make the transition from fossil fuels to renewables, it has been revealed that several of the big banks are still funding new fossil fuel projects.
A recent shock report from campaign group ShareAction showed that 25 banks that signed up to reduce emissions have actually provided £24 billion to 50 companies with large oil and gas expansion plans that are profiting from the recent hike in energy prices. It’s not where most sustainably-minded people would choose to put their money, but how can you be sure your money is actually doing something good?
A direct approach
When you put your money into an Innovative Finance ISA, such as those offered by Ethex and Energise Africa, you are making a direct investment into an organisation or project, so it’s easy for you to see where your money is going. And as we perform rigorous checks on every organisation we list on the platforms, you can be assured that your investment is actively helping to create a positive impact on people and the planet.
Whether you’re interested in helping support community energy generation, building a better infrastructure for electric vehicles or enabling off-grid families in sub-Saharan Africa to access clean and affordable energy, your ISA investment can be something you can be proud of!
Your ISA, your choice
As an investor, you have a lot of options open to you as you consider where you should use your tax-free ISA allowance and this guide is a great place to start to help you understand these.
If you could do one thing to personally accelerate our net zero transition, benefit people and the planet and earn a potential tax-free return, you should consider how you use your ISA allowance. While you don’t need to be a financial expert
to understand how the Innovative Finance ISA works, it’s worth doing a bit of research to determine if it’s right for you, as the peer-to-peer lending structure means it’s a higher risk investment and any projected returns are not guaranteed.
You should also be aware that you can only open one new Innovative Finance ISA with one single provider each tax year, but you do have the option to transfer in funds from an existing cash or stocks and shares ISA from previous years without affecting your £20,000 limit for this year.
So if you take a closer look at your ISA investments and decide you don’t like what you see, you have the opportunity to make your money work harder to do good. If you’re interested in learning more about the Innovative Finance options from Ethex and Energise Africa, take a look at the websites to learn more and see what tax-efficient investing opportunities are available and get all the information you need to make the decision on whether to use your ISA to get us closer to our net zero targets.
Risk warning: Capital is at risk and returns are not guaranteed. Tax benefits are subject to individual circumstances and may be subject to change.