So if you want an ethical ISA (that’s one that prioritises the planet, people AND profit), 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 Good With Money ‘Good Egg’ firm Triodos and building societies like Nationwide, Co-op and the Cumberland offer much more climate-friendly accounts.
Top 7 ethical current accounts in 2024
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.
Carbon analytics app Sugi – a Good Egg firm – helps you analyse the carbon impact of your current investments, compare investments and offset your portfolio. Plum and Moneybox round up any small change in your account and automatically moves it into a separate bank account which, over time, adds up. Moneybox also offers ‘Socially Responsible Investment’ options.
Best auto-savings apps for 2024
3. Cash ISAs
Even with recent interest rate rises, it’s pretty difficult to get a return on Cash ISAs that will beat inflation. However, they can offer some protection for cash you need readily, 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.
Top 5 green ISAs for your climate-friendly cash
4. Innovative Finance ISAs
If you’re looking for returns slightly above cash, but still don’t want to invest in equities (shares in companies), you could consider peer-to-peer investments or an Innovative Finance ISA (IFISA) with platforms such as Ethex, Energise Africa or Triodos Crowdfunding.
The Good Guide to the Innovative Finance ISA
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. We like Simply EQ’s Positive Impact Portfolios, Wealthify’s Ethical Plans and Moneybox’s Socially Responsible options.
We also like The Big Exchange from The Big Issue, and ethical options from AJ Bell, Interactive Investor and Hargreaves Lansdown.
Top 8 platforms for a green stocks and shares ISA in 2024
6. Responsible fund choices
Check out Good With Money’s regular Good Investment Review, in partnership with Squaremile Research and The Big Exchange, 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. For example:
- 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?
The Financial Conduct Authority will soon be bringing in new anti-greenwashing rules designed to improve the transparency and trust of investment products. Look out for our guide to the new rules, coming soon.
Top 3 green funds for your ISA or LISA
7. Find an IFA
For ethical financial advisers, check out ‘Good Egg’ firms EQ Investors, Switchfoot Wealth, BlueSphere Wealth, and Path Financial as well as Castlefield.
Top 9 ethical financial advisers in 2024
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