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Jo Thornhill
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Published: Dec 12, 2023, 1:48pm
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Kevin Pratt
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Investing in companies that are socially responsible, sustainable and deemed not to be contributing to climate change – so-called ‘ethical’ investing – is rising up the list of priorities for many consumers.
Sometimes referred to as environmental, social and governance (ESG) investing, this ethics-based approach was once a niche sector, but it is fast becoming mainstream. ESG funds in the UK grew by 64% during 2021, according to the Financial Conduct Authority (FCA) to reach £79 billion. The UK regulator also says the figure for ESG investments globally stands at £18.4 trillion.
But knowing where to invest can feel confusing, with different labels used to describe a broad range of ethical and sustainable investment funds.
The FCA has recently introduced measures to minimise ‘greenwashing’ – the practice of making something appear environmentally responsible when in fact it isn’t. The rules require investment funds to be clearer about their ethical credentials and not mislead investors in their product labelling and marketing.
We analysed a range of stocks and shares ISA providers and investment platforms to find our pick of the best ethical ISA providers (November 2023). We looked for providers who gave consumers a broad choice of ‘responsible’ or ethical investment funds, as well as comparing the charges on ISAs and customer experience scores. There is more detail about our methodology below.
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- Featured Partner
- Our Pick Of The Best Ethical Stocks And Shares ISAs
- AJ Bell
- Hargreaves Lansdown
- Interactive Investor
- Nutmeg
- Triodos Bank
- Circa5000
- The Big Exchange
- Methodology
- What is ethical investing?
- What does an ethical ISA invest in?
- What won’t ethical ISAs invest in?
- Why choose an ethical stocks and shares ISA?
- Is investing ethically going to cost me more?
- How to choose an ethical stocks and shares ISA
- Frequently Asked Questions (FAQs)
Guides To Investing
- Best Investment Trading Apps
- Best Trading Platforms
- Best Trading Platform For Beginners
- Best Forex Brokers
- Best Trading Platform for Day Trading
- Best SIPP Providers
- Stock Trading Courses
- How to Trade GBP/USD
Featured Partners
1
interactive investor
UK’s 2nd-largest investment platform for private investors
Leading flat-fee provider
1
interactive investor
On interactive investor’s Website
£100 Cashback Offer
2
AJ Bell
One of lowest platform fees on the market
Over 8,200 shares and 7,500 funds, ETFs and investment trusts
2
AJ Bell
On AJ Bell’s Website
Your capital is at risk.
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AJ Bell
5.0
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Responsible investment funds
7
Charges
Platform fee of 0.25% for ISA, plus £1.50 per fund per transaction, or £9.95 for shares. Additional annual fund management charges for individual funds may apply.
Customer experience score
71%
On AJ Bell’s website
Responsible investment funds
7
Charges
Platform fee of 0.25% for ISA, plus £1.50 per fund per transaction, or £9.95 for shares. Additional annual fund management charges for individual funds may apply.
Customer experience score
71%
Why We Picked It
AJ Bell offers a relatively low cost and easy-to-use investing platform (fees reduce for larger portfolios), which can suit beginners as well as more experienced investors. While it doesn’t offer a ready-made ethical stocks and shares ISA, it has seven ‘responsible’ fund options, including both UK and global funds. Among these is the AJ Bell Responsible Growth Fund, which includes investments with strong ESG credentials and excludes those without them. This fund has annual fees of 0.45%. At 71%, it gets a high customer experience rating from Fairer Finance.
Pros & Cons
- Low monthly platform charges
- Invest from £25 a month
- High customer satisfaction score
- Trading fees charged on funds
- High trading fees for shares
FEATURED PARTNER OFFER
Hargreaves Lansdown
5.0
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Responsible investment funds
14
Charges
Platform fee 0.45%. No fee to buy funds. Share trading incurs fees. Individual fund management charges may apply
Customer experience score
66%
Responsible investment funds
14
Charges
Platform fee 0.45%. No fee to buy funds. Share trading incurs fees. Individual fund management charges may apply
Customer experience score
66%
Why We Picked It
While Hargreaves Lansdown has one of the highest platform fees at 0.45% (it reduces for larger portfolios), there is no fee to buy or sell funds. It has a range of ESG and responsible funds on offer, giving choice to investors who want to prioritise this investment strategy. It also offers investors research and analysis into the ESG sector. At 66%, it gets a solid customer experience rating from Fairer Finance.
Pros & Cons
- Wide choice of ESG funds
- Invest from £25 per month
- No trading fees to buy and sell funds
- Higher monthly platform fee than competitors
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Interactive Investor
4.5
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Responsible investment funds
200 sustainable fund options. Includes its Ace 40 of top picks
Charges
Platform fee starts from £4.99 per month. Higher charges on investments worth more than £50,000. £3.99 charge on fund trading
Customer experience score
65%
On interactive investor's Website
Responsible investment funds
200 sustainable fund options. Includes its Ace 40 of top picks
Charges
Platform fee starts from £4.99 per month. Higher charges on investments worth more than £50,000. £3.99 charge on fund trading
Customer experience score
65%
Why We Picked It
Interactive Investor offers a range of 200 investment funds, from which it has selected its top picks – the ACE top 40, which it says are best-in-class. There are also ready-made ESG portfolios, which investors can put into an ISA. While the platform charge is high at £4.99 a month (starting rate) and there is a £3.99 fee on buying and selling funds as well as individual stocks, it is likely to appeal to those who want to create their own ESG portfolio. Once total investment holdings exceed £50,000, platform charges increase.
Pros & Cons
- Invest from £25 per month
- Wide investment choice
- Solid customer experience score
- High platform fee
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Nutmeg
4.5
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Responsible investment funds
Offers ready-made ESG portfolios with 10 risk levels
Charges
Platform charge between 0.35% and 0.75% per month. Additional fund management charges may apply
Customer experience score
70%
Responsible investment funds
Offers ready-made ESG portfolios with 10 risk levels
Charges
Platform charge between 0.35% and 0.75% per month. Additional fund management charges may apply
Customer experience score
70%
Why We Picked It
Nutmeg is a ‘robo-advisor’ so investors get a ready-made portfolio, tailored to their risk level, to invest within an ISA. Platform charges are high at 0.75% per year (this only drops once your portfolio is £100,000 or more). Fund management charges, for the underlying funds, will also apply, typically at around 0.2%. But Nutmeg has a high customer experience score from Fairer Finance, and if you’re looking for a clear and easy to use platform, which can help you to build a balanced ESG investment plan this could suit you. Minimum investment level is high at £500 as a lump sum or £100 per month.
Pros & Cons
- Ready-made ESG portfolios, tailored to risk level
- Easy to use platform
- Can’t self-select funds
- High charges
- High minimum investment
FEATURED PARTNER OFFER
Triodos Bank
4.5
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Responsible investment funds
Offers 1 ready-made stocks and shares ISA that invests in its own funds
Charges
Platform fee 0.4%. Fund management charges apply on top
Customer experience score
n/a
Responsible investment funds
Offers 1 ready-made stocks and shares ISA that invests in its own funds
Charges
Platform fee 0.4%. Fund management charges apply on top
Customer experience score
n/a
Why We Picked It
Triodos Bank is an ethical bank that offers a stocks and shares ISA which invests in its own actively managed ESG funds. It offers three funds and investors can invest in a mix of these or just one. Annual fees and fund management charges are relatively high but the minimum investment is low at £25. Triodos Bank says ethical banking and investing is its sole purpose, rather than offering a few sustainable funds. Its investment service does not have a rating from Fairer Finance, but it has a score of 3.9 / 5 on Trustpilot.
Pros & Cons
- Invest from £25 per month
- Run by an ethical bank
- ISA only invests in Triodos Bank’s own funds
- High charges
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Circa5000
4.0
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Responsible investment funds
5 different funds which can be put in an ISA
Charges
£1 per month plus platform fee of 0.45%, fund management fees 0.42% per month
Customer experience score
n/a
Responsible investment funds
5 different funds which can be put in an ISA
Charges
£1 per month plus platform fee of 0.45%, fund management fees 0.42% per month
Customer experience score
n/a
Why We Picked It
CIRCA5000 is an app-based digital investment platform offering a small number of funds that can be put inside an ISA. You can invest in companies across five thematic investment funds: green energy and tech, sustainable food and biodiversity, clean water and waste, social and economic empowerment, and health and wellbeing. Investors select their risk level and Circa5000 creates the portfolio to suit their risk appetite based on holdings from these funds. Charges are relatively high, but minimum investment levels are low at just £5 a month, so this could suit beginner investors. While CIRCA5000 does not yet have a customer experience rating from Fairer Finance, it scores 4.3 / 5 rating on Trustpilot.
Pros & Cons
- Ethical investment provider
- Low monthly investments accepted
- Mobile only app
- Relatively high charges
FEATURED PARTNER OFFER
The Big Exchange
4.0
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Responsible investment funds
All funds available pass The Big Exchange’s test for ‘positive contribution to people and the planet’, with 60+ funds listed
Charges
Platform fee 0.25%
Customer experience score
n/a
Responsible investment funds
All funds available pass The Big Exchange’s test for ‘positive contribution to people and the planet’, with 60+ funds listed
Charges
Platform fee 0.25%
Customer experience score
n/a
Why We Picked It
The Big Exchange is relatively new, having launched in 2020 as a joint venture with the Big Issue. The platform has a low annual fee of 0.25% making it competitive and it only lists actively managed funds on its site that it considers are ‘making a positive contribution to people and the planet’. Buying and selling funds is free, but annual management fees for the underlying funds will apply on top of the platform fee. You can invest from £25 a month. The platform does not yet have customer experience score ratings. It has a 3.8 / 5 customer rating on Trustpilot. It offers ready-made investment bundles to put in an ISA (cautious, balanced or adventurous), or investors can self-select their funds.
Pros & Cons
- Low platform fee
- Invest from £25 per month
- 60+ actively managed responsible funds
- New platform – scant data about customer satisfaction
- Can’t buy individual stocks, only funds
Methodology
When researching and analysing our pick of the best ethical stocks and shares ISAs we looked for platforms with the broadest choice of responsible and ethical stocks and funds and those with lower platform and investment charges.
We placed slightly greater weight on those investment providers where ethical investing is baked into the company ethos (so there should be less risk of greenwashing), even where such providers may be offering less overall investment choice, or may offer a robo advisor-style service.
We also looked at the customer experience score ratings on Fairer Finance (November 2023) for each of the providers, where they were available, or if not we reviewed individual provider’s Trustpilot scores. These scores take into account factors such as customer service and ease of use among.
What is ethical investing?
When you invest ethically this usually means you put your money into companies that are not harmful to people or the environment. Typically this might mean avoiding companies and industries such as tobacco, alcohol, gambling, firearms and fossil fuels, such as oil and gas, and also companies that might pay low wages or have poor corporate governance, for example.
Ethical investing can have many names and meanings, depending on where you look. But ESG, which stands for environmental, social and corporate governance, tends to be used frequently in the UK to refer to socially and environmentally responsible investments.
Growing numbers of consumers are becoming interested in being ethical with their money. Fundamentally, ethical investing means the investor selects their investments based on principles and beliefs as much as, and maybe more than, financial performance.
What does an ethical ISA invest in?
When you invest in an ethical or responsible stocks and shares ISA, whether you self-select the stocks, funds or exchange traded funds or you opt for a ready-made portfolio within your ISA wrapper, you’ll be selecting investments that aim not to cause harm to society or the environment.
This is likely to include companies that avoid what is often termed ‘sin’ stocks or companies, so those involved in tobacco, alcohol or gambling, for example.
Further to this, many ESG ISAs will invest in what is termed ‘impact’ funds. These aim to invest in companies that generate a measurable benefit either socially or environmentally, such as those involved in developing and producing renewable energy or businesses that provide job training or education.
What won’t ethical ISAs invest in?
As mentioned above there are a number of ‘sin’ stocks or companies that ESG funds avoid. These are likely to include, among others:
- tobacco industry
- alcohol production and sales
- gambling
- firearms and other weapons
- fossil fuels, including oil giants and coal mining
- deforestation
- companies with a poor record on treatment of workers and low pay.
Is investing ethically going to cost me more?
Ethical ISAs should not cost any more than standard ISA investing. The platform fees are the same, regardless of how you invest. The fund management charges of the underlying funds in your ISA (depending on how you invest) may vary depending on the specific funds.
When it comes to investment performance, investors may need to accept that an ESG portfolio will mean some deviation from traditional benchmark indices, such as the FTSE100. Sometimes the ESG funds will outperform a traditional index, but sometimes they won’t.
That said, in the long-term many experts say ESG portfolios could well outperform traditional benchmarks, as less favourable companies, such as oil producers, are likely to attract fewer investors.
Overall, investing in an ESG fund can mean accepting a bit more volatility. This is because many ESG funds invest in sectors such as technology or smaller, newer companies, which may not yet be fully established.
Frequently Asked Questions (FAQs)
Can I transfer my ISA to an ethical ISA?
You can transfer money from a cash ISA or stocks and shares ISA into an ethical stocks and shares ISA, subject to the rules of the individual ISA providers. You’ll need to apply for a transfer of the money in order to keep its tax-free status. Transfers tend to take around 30 days, but they don’t count towards your £20,000 annual tax-free ISA allowance.
How many ethical ISAs can I have?
Under current rules you can only have one of each type of ISA in a tax year. That means you can only invest in one ESG stocks and shares ISA and one ESG cash ISA each tax year, for example, splitting your annual £20,000 tax-free allowance between them as you wish.
However, from April next year ISA rules are changing. You’ll be able to hold and invest or save into multiple ISAs of the same type, so it will be possible to have more than one stocks and shares ISA (ethical or standard) if you wish.
How often should I monitor my ethical investments?
Ethical investments are no different to standard investments in terms of how often you monitor them.
Financial advisors tend to recommend that investors review their portfolio at least once a year, checking that the holdings are still in line with your appetite for risk and your investment aims.
There is no harm monitoring your investments more often, but you should try to resist the temptation to start tinkering with your ISA holdings in response to short-term volatility. Any kind of equity investment should be viewed as a long-term saving strategy and you’ll need to be prepared for the value of your holdings to rise and fall over time.
Bear in mind that there is no guarantee that you will get back all or even any of your original investment.
Guides To Investing
- Best Investment Trading Apps
- Best Trading Platforms
- Best Trading Platform For Beginners
- Best Forex Brokers
- Best Trading Platform for Day Trading
- Best SIPP Providers
- Stock Trading Courses
- How to Trade GBP/USD
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Jo ThornhillEditor
I am passionate about personal finance issues and helping consumers navigate the world of insurance, credit, savings and pensions. I have been a money journalist for almost two decades, including ten years on the award-winning personal finance desk at the Mail on Sunday.
As a financial expert with extensive experience in personal finance and investments, my background includes nearly two decades as a money journalist, with a specialization in insurance, credit, savings, and pensions. My work, including ten years on the award-winning personal finance desk at the Mail on Sunday, reflects a deep understanding of financial markets, investment strategies, and the evolving landscape of ethical investing.
Now, let's delve into the key concepts mentioned in the article you provided:
-
Ethical Investing and ESG:
- Ethical investing involves putting money into companies that are not harmful to people or the environment. This often means avoiding industries such as tobacco, alcohol, gambling, firearms, and fossil fuels.
- ESG stands for environmental, social, and corporate governance, commonly used in the UK to refer to socially and environmentally responsible investments.
-
Rise of Ethical Investing:
- The article highlights the growing trend of investing in companies that are socially responsible, sustainable, and not contributing to climate change.
- ESG funds in the UK grew by 64% during 2021, reaching £79 billion, according to the Financial Conduct Authority (FCA).
-
Minimizing 'Greenwashing':
- The FCA has introduced measures to combat 'greenwashing,' which involves making something appear environmentally responsible when it is not.
- Investment funds are now required to be clearer about their ethical credentials and avoid misleading investors in their product labeling and marketing.
-
Best Ethical ISA Providers:
- The article lists several ethical stocks and shares ISA providers, including AJ Bell, Hargreaves Lansdown, Interactive Investor, Nutmeg, Triodos Bank, Circa5000, and The Big Exchange.
- Each provider is assessed based on factors such as platform fees, customer experience scores, and the variety of responsible or ethical investment funds offered.
-
Platform Reviews:
- Detailed reviews are provided for selected ethical ISA providers, discussing their responsible investment funds, charges, customer experience scores, and the reasons for picking each platform.
- Platforms like AJ Bell, Hargreaves Lansdown, Interactive Investor, Nutmeg, Triodos Bank, Circa5000, and The Big Exchange are evaluated for their strengths and potential drawbacks.
-
Methodology for Selection:
- The article outlines the methodology used for selecting the best ethical stocks and shares ISA providers. It emphasizes the importance of a broad choice of responsible and ethical stocks, lower platform and investment charges, and companies where ethical investing is ingrained in their ethos.
-
FAQs on Ethical Investing:
- The FAQs section addresses common queries related to ethical investing, such as transferring existing ISAs to ethical ISAs, the number of ethical ISAs allowed, and the frequency of monitoring ethical investments.
In summary, the article provides comprehensive insights into the rise of ethical investing, the efforts to combat greenwashing, and a detailed review of ethical ISA providers, offering readers valuable information to make informed investment decisions.
