Ethical Income Fund ISAs

Ethical Income Fund ISAs

Ethical investment funds have become increasingly popular, partly due to growing public awareness of issues such as climate change and human rights, and also because investors are attracted by the potential returns available.

Ethical investments could be a valuable addition to your financial strategy because they allow you to shelter any potential returns from tax, diversify your portfolio, and know that you are helping to make the world a better place.

Ethical income fund ISAs invest in companies that are deemed to be socially responsible, in terms of human rights and environmental impact. If you are an income seeker, you can opt for ethical funds that offer monthly, quarterly or twice-yearly income.

What constitutes 'ethical' varies from investor to investor depending on their personal values, so it's best to discuss your specific priorities with your chosen ISA manager before investing.

Benefits of an ethical income fund ISA:

• By using your ISA allowance in this way, you can be sure that your money only goes towards causes that tie in with your personal values.
• Companies which have a good ethics track record are less likely to become the subject of dispute or legal action - both of which could have a negative effect on share prices.
• An ethical income fund ISA allows you to diversify your investment portfolio into new, sustainable markets.
• By using your ISA allowance to invest in ethical income fund ISAs, you can benefit from tax-efficient income. You can invest up to the maximum ISA allowance into an income fund isa, click here to check the current limit. 

How do I choose an ethical income fund ISA?

It can be tricky for individual investors to judge whether a particular company is operating ethically or not, so most investments of this type are made though a specialist ethical 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 and negative criteria. The different approaches of ethical investment funds are often described as:

• Light green - this approach avoids investments that have a negative impact. For example, they may avoid companies involved in weapons manufacture, human rights breaches, or animal testing.
• Dark green - this approach involves actively seeking to invest in companies that are making a positive contribution to the environment and society, such as companies in the renewable energy sector