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Ethical Fund ISAs

Invest in line with your principles

"Ethical fund ISAs allow you to invest in companies that operate in line with your principles and values."

 

James Caldwell, Director

Ethical Fund ISAs

Ethical fund ISAs invest only in companies that are considered to meet a certain standard of social or environmental responsibility. What constitutes 'ethical' varies from investor to investor depending on their personal values - for example, some people may feel that investing in the alcohol industry is unethical, while others may not. Therefore, it's vital to discuss your priorities with your ethical fund ISA manager before investing.

Benefits of investing in ethical funds…

• By using your ISA allowance to invest in ethical funds, you can be sure that your money only goes towards causes that tie in with your personal values and morals.
• From a purely practical point of view, companies which have a good ethics track record are less likely to become embroiled in regulatory disputes, court cases and public boycotts - all of which can have a negative effect on share prices. Therefore, your investments may benefit from better long-term prospects - especially as consumers become more ethically aware.
• An ethical fund ISA allows you to diversify your investment portfolio into new, sustainable markets.
• By using your ISA allowance to invest in ethical funds, you can reap the returns tax-efficiently, with the extra reassurance that your money is being used in ways that tie in with your principles.

How do I go about investing in an ethical fund?

It can be tricky for individual investors to judge whether a particular company is operating ethically or not, so most ethical investments are made via a fund manager. An ethical fund manager will thoroughly research potential investment targets, ensuring that they meet certain criteria. Often, ethical fund managers will assess companies on both positive criteria (i.e. activities they engage in that are actively ethical) and negative criteria (i.e. activities they engage in that are actively unethical).

Positive criteria might include:

• Does the company have specific environmental protection guidelines and practices?
• Is the company taking steps to reduce its environmental impact?
• Does the company ensure the health and safety of all its workers?
• Does the company have a recycling policy?
• Does the company have measures in place to prevent child labour in its factories?
• Does the company pay its workers a fair wage?

Negative criteria might include:

• Is the company involved in the production of weapons?
• Does the company have any ties to animal testing facilities?
• Does the company have any ties with countries that have oppressive regimes or those that have a poor human rights record?
• Is the company involved in industries that might be considered harmful or damaging to those involved in them, such as gambling or pornography?
• Does the company promote harmful products (e.g. tobacco), or promote products in a socially irresponsible way (e.g. infant formula in developing nations)?
• Are the company's manufacturing processes or waste disposal methods harmful to the environment?

Compare some of the ethical funds available for ISA investment in the table below:

Ethical Fund ISAs - Bond Funds

Fund Manager	Fund	Fund Manager Initial Charge¹	Your Saving	Saving On ISA²	AMC³	Income Yield*	Fact Sheet	Apply Now
	Amity Sterling Bond	0%	3.75%	£400	1.25% 1.15%	5.4%	Factsheet	Apply Now >
	Income Paid Quarterly.The Fund aims to achieve attractive income from investing in UK Government and good quality sterling fixed interest securities including UK government bonds, corporate bonds, preference shares, convertibles and other loan stock issued by companies which make a positive contribution to society and the environment through sustainable and socially responsible practices. The Fund seeks to avoid investment in certain areas such as companies which have a material involvement in alcohol, tobacco and weapon production, gambling and publication of violent or explicit materials. See latest fund factsheet for details.
	Sustainable Future Corporate bond	0.5%	3.50%	£373	1.00% 0.90%	3.9%	Factsheet	Apply Now >
	Income Paid Quarterly. To produce a high level of investment income through diversified investment principally in sterling denominated fixed interest securities issued by corporates, governments and supranational institutions. Limited investment in non-sterling denominated fixed interest securities may be made from time to time. All investments will be expected to conform to our social and environmental criteria. The Fund may invest in any of the following financial instruments: transferable securities, money market instruments, units in collective investment schemes, deposits, derivatives and forward transactions. See latest fund factsheet for details.
	Ethical Bond	0.5%	4.50%	£480	1.00% 0.90%	3.6%	Factsheet	Apply Now >
	Income Paid Twice Yearly. The Fund aims to maximise returns through investment primarily in fixed interest securities of an ethically screened and diversified list of companies. The Fund may also invest in warrants, collective investment schemes, money market instruments and derivatives. The Fund will invest in investment grade and high yield securities. Government securities are excluded. Non-sterling denominated issues are permitted and any currency exposure will normally be hedged back to sterling. To manage risk the Fund will aim to achieve a wide degree of diversification across the available issuers and the manager will adopt a rigorous credit management process. Derivatives may be used to increase, reduce and maintain the investment exposure of the Fund including use of single name CDS and interest rate swaps in addition to EPM. See latest fund factsheet for details.

*Current Income Yields are Gross, Variable and Not Guaranteed as at 25/02/13 - See Fund Factsheet for details.

¹The Initial Charge after 100% of the Fair Investment Company Charge has been rebated as well as any fund manager discounts we can pass on to you if applicable.

²Based on 2011/12 ISA allowance of £10,680 when you invest through Fair Investment Company.

³AMC is the Annual Management Charge applied by the Fund Manager. By using our Fund Supermarket we can rebate up to 0.20% of the AMC back to you. This rebate is paid into a cash account which is set up for you when you first invest.

 

Bonds: To provide the potential for overall returns these funds invest in bonds, also known as fixed interest securities. This is achieved by receiving regular interest on loans to companies or governments. There is a chance the bond issuer could fall into financial difficulty and will not be able to pay the interest or the loan back, which could result in a fall in your investment returns. Bonds can also be sensitive to trends in interest rate movements and if interest rates go up, the returns on your investment are likely to fall as bonds can become less attractive. On the other hand, if interest rates fall, bonds are likely to become more attractive and your investment returns increase.

 

Ethical Fund ISAs - Equity Funds

Fund Manager	Fund	Fund Manager Initial Charge¹	Your Saving	Saving On ISA²	AMC³	Fact Sheet	Apply Now
	Jupiter Ecology	0.48%	4.52%	£482	1.50% 1.30%	Factsheet	More Info >
	The objective of the Fund is to achieve long-term capital appreciation together with a growing income consistent with a policy of protecting the environment. The Fund’s investment policy is to invest worldwide in companies which demonstrate a positive commitment to the long-term protection of the environment. See latest fund factsheet for details.
	Schroders Global Climate Change Fund	0%	5.25%	£560	1.50% 1.30%	Factsheet	More Info >
	The Fund's investment objective is to provide capital growth primarily through investment in equities and securities of worldwide issuers which will benefit from efforts to accommodate or limit the impact of global climate change. Investment will be primarily in directly held transferable securities. The fund may also invest in collective investment schemes, cash, deposits, derivatives, warrants and money market instruments.See latest fund factsheet for details.
	Sustainable Future Global Growth	0.5%	3.50%	£373	1.50% 1.30%	Factsheet	More Info >
	To produce long-term capital appreciation through diversified investment principally within global equity markets. Allocations to individual markets will vary over time. Equity selections will be based on price and long term total return prospects. Limited investment in global bond markets may be made. All investments will be expected to conform to our social and environmental criteria. The Fund may invest in any of the following financial instruments: transferable securities, money market instruments, units in collective investment schemes, deposits, derivatives and forward transactions. See latest fund factsheet for details.

¹The Initial Charge after 100% of the Fair Investment Company Charge has been rebated as well as any fund manager discounts we can pass on to you if applicable.

²Based on 2011/12 ISA allowance of £10,680 when you invest through Fair Investment Company.

³AMC is the Annual Management Charge applied by the Fund Manager. By using our Fund Supermarket we can rebate up to 0.20% of the AMC back to you. This rebate is paid into a cash account which is set up for you when you first invest.