Five ethical ISA options to invest in this year

Appetite for ethical investing continues to rise, with an increasing number of banks and fintechs expanding their offering in the space.

Ethical ISAs bring more elements into consideration for investors, with fund selection criteria, company ownership, and transparency taking on equal weight alongside financial performance.

Ahead of the ISA deadline on 5th April, AltFi looks at some of the ethical options on offer this year for both startout investors and seasoned ISA holders. 

Triodos Bank

Minimum investment: £1,000

Fees: Between 1.15 per cent and 1.5 per cent, depending on the fund

Performance: Five-year average returns range between 8.72 per cent and 9.61 per cent for the funds (excluding the Triodos Sterling Bond Impact Fund, given lack of track record).

A clear front-runner in terms of ethical investing, Bristol-based Triodos Bank has over 16 years’ experience in impact investing and now boasts EUR 24.1bn in assets under management. The company claims to use rigorous sustainability analysis and maintain strict minimum standards to determine the investments on offer. 

Triados provides investment options across a range of funds, including sustainable corporate bonds and shares, as well as UK government gilts.

Its three fund types are:

-          Triodos Global Equities Impact Fund, which invests in large, well-established companies moving towards greater sustainability.

-          Triodos Pioneer Impact Fund which invests globally in SMEs pioneering the transition to a sustainable economy and society.

-          Triodos Sterling Bond Impact Fund which invests in corporate, green and social bonds and UK government gilts.

Investors can choose their own weighting between the three, or just select one or two to invest in. The minimum initial investment is £1,000 per fund and the minimum top up is £500.

Unlike many other ISA options, Triodos also publishes the full portfolio of the companies that it invests in, so its stocks and shares ISAs offer a greater level of transparency than most.

Clim8 Invest

Minimum investment: £25 initial investment, £10 per month.

Fees: Approximately 1.1 per cent (comprising 0.6 per cent annual service fee, and 0.3-0.5 per cent underlying fund manager fees)

Performance: Returns averaging 13.35 per cent (August 2020 - August 2021, based on highest risk portfolio)

With six core themes – green energy, clean mobility, climate technology, water systems, sustainable food, circular economy – Clim8 Invest’s ISAs are entirely green-focused. The company prides itself on digging deep to select the funds and companies that are actively tackling climate change and making strong financial returns.

The company says it screens potential investments by environmental impact, theme, and financial results to ensure the best possible performance for its customers. 

Unlike some other ISA offerings, Clim8 Invest’s investment team construct the portfolios themselves – in line with the client’s risk appetite – which are then actively managed (in-house) and rebalanced regularly.

Interactive Investor:

Minimum investment: £100 initial investment, £25 per month

Fees: £9.99 per month

Performance: Varies according to portfolio make-up.   

Much as its name suggests, Interactive Investor (ii) allows customers to choose the make-up of their own portfolio from a handpicked selection of ‘ACE’ investments, featuring “best in class funds, investment trusts and ETFs”.

ACE stands for ‘Avoids’, ‘Considers’ and ‘Embraces’ – ii’s approach towards curating its selection of investments. Unlike some other ethical investment platforms, ii avoids funds that exclude investments into companies solely on account of type or sector. Instead, it takes a more open approach,  

ii’s flat fee structure is fairly unique among its peers. The mechanism will benefit larger ISA holders – the company says it starts to become competitive with ISA contributions of £30,000 and above – though this may put off smaller investors looking to dabble.

The fees may be steep for small investors, but ii has now launched a Friends and Family account, which means that for £5 more per month, an account holder can bring in up to five friends or family members as additional ISA account holders at no extra cost.

For new investors unsure how to build their portfolio, the company also offers a range of Quick Start Funds – including ethically-focused options – as a one stop shop for active investing.

The Big Exchange:

Minimum investment: None initially, then £25 per month.

Fees: 0.25 per cent annual platform fee. No entry, exit or trading fees.

Performance: New platform.    

Co-founded by The Big Issue – which aims to reduce poverty by creating opportunity through self-help, social trading, and business solutions – The Big Exchange was conceived with ethical values at its core. 

Every investment on the platform must prove that it makes a positive contribution to people or the planet, according to the company, and its ethical ISA has won awards from both Ethical Consumer and Boring Money.

With no minimum investment and no initial start-up costs other than the platform fee, the barriers to entry are low for new investors looking to get started. As a Flexi ISA, customers can also withdraw money without it affecting their ISA allowance.

The company aims to be fully transparent, providing an impact summary and a rating for each investment, giving full sight of all the companies held in any given fund.

Other founding partners include big names like Artemis, abrdn, JP Morgan and Schroders, giving The Big Exchange additional credibility, despite being a relative new-comer to the ISA market.

Moneybox:

Minimum investment: £1

Fees: Subscription fee of £1 per month (free for first 3 months), Moneybox platform fee of 0.45 per cent, plus annual fund provider costs of between 0.12 per cent and 0.58 per cent.

Performance: An average of 17.2 per cent (based on 2019 and 2020 results)

An old favourite among younger investors, app-based digital wealth manager Moneybox makes ISA investing accessible with no entry or exit fees, and with just a £1 minimum initial investment.

Upon opening a stocks and shares ISA with the company, investors can opt to invest in the Global Shares ESG fund, which, managed by Old Mutual, includes a range of companies from across the developed global stock market considering a host of ESG factors.

A winner of the Boring Money best ISA award, Moneybox does not offer a prescribed ethical ISA option, but rather allows customers to compile ethical investments according to their preference.