Compare Ethical ISAs
Find the best ethical stocks and shares ISA to invest this year’s tax free allowance.
Investment ISAs put your capital at risk & you may get back less than you originally invested
- Fund Choice: Nutmeg allow you to align your investments with your values. With continuous oversight from the Nutmeg in-house investment team, their SRI portfolios place an emphasis on environmental, social and governance factors
- Invest From: Min. £500 single
Why we like it: If investing responsibly is important to you then Nutmeg have put together a portfolio tilted towards companies and bond issuers that have high environmental, social and governance (ESG) standards. Nutmeg invest in exchange traded funds (or ETFs) that avoid companies engaged in controversial activities while focusing on those that lead their peers on ESG. No tie-ins, no set-up fees, no exit charges. Easy, online set up in minutes. Start with as little as £500. Capital at risk. Approved by Nutmeg 09/08/2024
- Fund Choice: Choice of more than 200 sustainable investment options
- Invest From: £25 a month or any lump sum
Why we like it: The UK’s first rated list of ethical investments to help you align investments with your personal values. Building your investment portfolio can be tough – and it is even more difficult when you want to choose ethical investments. That can mean a lot of research. The ii ACE 40 makes the job easier for you. Interactive Investor select over 200 sustainable investment options to help you identify the socially responsible and environmental funds, investment trusts and exchange-traded funds (ETFs) that best reflect your own values.to help you identify the socially responsible and environmental funds, investment trusts and exchange-traded funds (ETFs) that best reflect your own values. Capital at Risk
- Fund Choice: International Ethical Fund which has been designed to invest in shares of global companies that have been assessed to meet ethical criteria
- Invest From: £10pm
Why we like it: An investment linked to an index that includes global companies but minimal, if any, direct exposure to non-renewable energy, adult entertainment, alcohol, gambling, tobacco or weapons and companies that do not meet the UN Global Compact Principles. Winner of ‘Leading Mutual Insurer’ and ‘Best Tax Efficient Products Provider UK’ at the World Business Outlook Awards 2023. Capital at Risk
- Fund Choice: Invests in companies that are likely to benefit from measures taken to improve the environment, human welfare and quality of life. Capital at risk.
- Invest From: £25 pm
Why we like it: This fund works on a “best ideas” basis with 40 to 50 company holdings. The fund applies both negative and positive screening. There is also a focus on long-term themes and trends such as infrastructure and changing demographics. The fund has reasonable ongoing charges of 0.76% pa for an actively managed fund.
- Fund Choice: The Fund aims to track the performance of the Solactive L&G Enhanced ESG UK Index. Capital at risk.
- Invest From: £25
Tracks shares in companies that demonstrate good environmental, social and governance efforts and are incorporated or headquartered or which have their principal business activities in the UK.
- Fund Choice: Invests in companies whose operations are considered to be making a positive contribution to society and seeks to avoid companies which, on balance, are felt to be harming the world, its people or its wildlife. Capital at risk.
- Invest From: £25 pm
Why we like it: This fund works on a “best ideas” basis with 40 to 50 company holdings. The fund applies both negative and positive screening. There is also a focus on long-term themes and trends such as infrastructure and changing demographics. The fund has reasonable ongoing charges of 0.76% pa for an actively managed fund.
- Fund Choice: Investment trust that invests predominantly in companies that provide, utilize, implement or advise upon technology-based systems, products or services in environmental markets, particularly those of alternative energy and energy efficiency, water treatment and pollution control, waste technology & resource management. Capital at risk.
- Invest From: £25 pm
Why we like it: Launched in 2002 Impax Environmental Markets is one of the UK’s largest environmental focused investment trusts which aims to enable investors to benefit from growth of more efficient delivery of services such as energy, water and waste.
- Fund Choice: Actively managed Fund that seeks to invest in high quality companies whose products, services or behaviour are deemed to make a positive impact on society and which emphasize sound environmental, social and governance (ESG) practices. Capital at risk.
- Invest From: £25 pm
Why we like it: The fund manager seeks to identify profitable and well managed businesses that make a positive impact on society operating in markets that offer attractive structural growth opportunities.
- Fund Choice: Tracks companies in the clean energy sector. Capital at risk.
- Invest From: £25 a month or any lump sum
Good to know: A member of the Interactive Investor ACE 40 ,this fund is passively managed by BlackRock and reflects the return of the S&P Global Clean Energy Index (the benchmark). The Index is designed to provide exposure to the leading publicily listed companies in the global clean energy business from both developed and emerging markets. The fund has reasonable ongoing charge of 0.65% pa.
What is an ethical ISA?
An ethical ISA is a Stocks and Shares ISA account that invests in funds that are managed in line with a particular ethical investment strategy.
They do this by excluding certain companies and industries from its underlying investments, such as gambling or tobacco production companies.
If you invest in individual shares that you pick yourself, then you just need to avoid companies in industries that you are not comfortable with.
However, if you are investing in managed or passive funds then this becomes more difficult. Your investment is controlled by a fund manager and your money is spread across many different companies that they choose.
Therefore, the term ethical ISA, or ethical Stocks and Shares ISA, usually refers to an ISA that specifically consists of ethical funds.
These are funds that are put together with certain ethical principles in mind. They will refrain from investing in certain industries or companies while still competing for the best returns in their sector.
The best ethical Stocks and Shares ISA for you will depend on several factors from performance to charges, and this guide will give you the need-to-know information before you invest.
What do ethical ISAs invest in?
Ethical funds often invest the same way as standard managed funds, with the exception of certain ethically questionable assets. Perhaps a better question to ask is: what do ethical investment ISAsnot invest in?
The main industries in which ethical Stocks and Shares ISAs will avoid investing in are:
- Gambling
- Armaments
- Fur trade
- Alcohol
- Tobacco
- Pornography
Some additional factors that they will take into consideration are:
- Is the company environmentally responsible?
- Is the company socially responsible?
- Does the company treat its employees, customers and suppliers fairly and ethically?
Some funds exclude all of the above, some only a few, and what is excluded depends on the strategy of each fund.
Some ethical funds also avoid investing in industries such as oil and mining, due to the environmental impact these companies can be responsible for.
Additionally, ethical funds also exclude companies guilty of human rights violations for its employees or any other people affected by its practices.
What are some other examples of ethical investing?
Another way to identify an ethically managed fund is by the ESG (Environmental, Social and Governance) term.
An ESG fund will invest in companies that respect these three core values. Essentially, the underlying companies they invest in need to be environmentally friendly, socially responsible, and run fairly and ethically.
ESG funds usually have ‘ESG’ in the fund name so they are easily identifiable.
Do ethical ISAs perform well?
An ethical investment ISA has just as much potential to perform as well as a standard ISA investment.
While fund managers may be more limited in the companies they invest in due to their ethical requirements, there are several benefits of investing in companies that operate with ethical responsibilities in mind:
- Less likely to face regulatory fines
Government bodies and industry regulators can levy huge fines against corporations breaching ethical, social or governance rules.
Some of these fines are not to be taken lightly. They can seriously damage a company’s longevity and its reputation once the fines are made public.
A company that practices ethically as a priority is less likely to get into this kind of trouble.
- Ahead of regulatory changes
With global issues such as climate change becoming more and more of a threat every day, legislation is constantly being introduced to keep businesses operating responsibly. This includes due care for the environment and the social cultures that they affect.
The companies that are already ahead of this curve have less catching up to do. They could be the ones that thrive in their industry in the long run.
- Social Considerations
If a company treats their employees, customers or suppliers poorly, the repercussions could be detrimental to its overall success.
The media can expose unethical social practices and seriously damage the reputation of big businesses. For example, Amazon has faced intense scrutiny over the treatment of their employees and have had to take serious action to make reparations.
If customers are treated poorly, the industry regulator can step in and conduct a wide-scale review of their practices and enforce compensation where applicable.
These are the types of issues that ethical ISA funds will look to avoid. They will do this via their stock selection, and also via their own stewardship with regards to the companies they invest in.
Many fund managers will use their shareholder power to influence a company’s behaviour at shareholder votes and meetings towards an ethical and sustainable code of practice.
What are the negatives of an ethical ISA?
If you are looking for an ethical Stocks and Shares ISA then you will have less choice than with a standard investment ISA.
Although there are plenty of ethical ISA funds and investment options out there, there are no doubt fewer options than there are with standard investments.
Finding the best ethical ISA for you will depend on the underlying investments that you choose and the ongoing charges that your ISA provider will take from your portfolio.
Frequently Asked Questions
Can I transfer my ISA into an Ethical ISA?
If you have a Stocks and Shares ISA already then you will just need to sell your investments and purchase ethical investments instead.
If you need to transfer to another provider for access to a wider range of ethical funds, you can do so by completing a form with your new ISA provider.
You can also easily transfer a Cash ISA into an ethical ISA using this same method.
Do I pay tax when withdrawing from an ethical ISA?
Ethical ISAs are completely tax-free as they have the ISA wrapper applied to them. This means that capital gains, income and dividend tax will not apply to your investments.
Can I withdraw money from an Ethical ISA?
Yes, you can withdraw money at any time from your ethical ISA investment.
Can I lose money in an ethical ISA?
Yes, you can. The value of your underlying ethical investments will go up and down, so you could lose money, particularly over the short term.
How do I open an ethical ISA?
You can open most ethical ISAs online, over the phone or by post. You will need to make a debit card contribution or set up a Direct Debit to start your account.
How much can I contribute to an ethical ISA?
You have an annual allowance of £20,000 for Stocks and Shares ISAs in the 2024/25 tax year.
Will I be charged for an ethical ISA?
Your ethical ISA provider will take ongoing and ad hoc charges from your account. These will be outlined in the provider’s terms and conditions. You should consider this when you compare ethical ISAs to invest in.