Ethical ISAs

What is an Ethical ISA?

An ethical ISA is an ISA where your money is used to invest in green, eco-friendly and ethical funds. 

You can invest ethically and still make money. Ethical ISAs allow you to invest in a socially responsible manner and have more say about where your money is invested. In this day and age, more and more people want more control over where their money is invested.

Ethical ISA funds are used to invest in unit trusts, gilts, the stock exchange, life assurance and many other similar ventures. 

They are most suitable for people who are willing to leave funds in their ISA for long periods such as five years. They are also good for people who are willing to withstand a bit more fluctuation in the value of their fund.

What Funds are Likely to be Excluded in an Ethical ISA?

While this varies from provider to provider and some are more ruthless than other, generally the following are excluded, funds derived from:

• Tobacco
• Alcohol
• Pornography
• Gambling
• Fur trade
• Armaments

Some also exclude: Oil and mining companies due to environmental concerns and human rights abuse

Some companies don’t necessarily exclude all funds associated with these industries but instead look at each fund individually and assess the track record of that particular company in terms of their human rights or green issues.

Why Choose an Investment ISA?

An investment ISA can be a good way to put aside some money each month or invest some extra cash. 

This kind of account is not advised if you don’t have any other savings or are in debt because you won’t be able to access your money easily if you need to and you could make losses.

However, Investment ISAs have the potential to provide better returns than any other savings account.

Some things to consider include:

• Assess the level of risk you’re willing to take, most providers can filter assets depending on the level of risk you’re willing to take or even provide you with a ready-made portfolio
• Low risk investing tends to focus on bond funds which pay interest or dividends regularly, whereas higher risk portfolios tend to focus on property investment and the stock market
• Decide if you want an Ethical ISA which completely bans all funds from companies such as tobacco etc. or would like a lighter approach
• Providers often hold a limited amount of carefully selected options to invest in whereas others have a much larger range of funds. Work out which is right for you
• Some providers have a simple interface with clear copy about each investment and its past performances. Make sure you find one that you find easy to use, helpful and clear

Currently, you are able to invest anything up to the tax threshold and choose to have it spread across a Cash, Stocks and Shares and Innovative Finance ISA or consolidated within one account.

As you can only fund one Ethical ISA per tax year it’s a good idea to shop around before you make your choice