Ethical stocks and shares ISAs

Key takeaways

• An ethical stocks and shares ISA is a type of ISA that lets you invest in companies or funds that meet certain ethical, social, and environmental standards

• Ethical companies prioritise fair treatment, environmental sustainability, human rights, gender equality, wildlife protection, and workers’ rights

• Ethical investments may avoid regulatory fines and adapt to new legislation

• What counts as ‘ethical’ depends on your personal views - you may want to screen out companies that conflict with your values, or actively choose companies that contribute positively to society or the environment.

What is an ethical ISA?

An ethical ISA is a type of Individual Savings Account (ISA) where funds are invested in companies' stocks and shares that align with the investor's personal beliefs.

These accounts typically exclude industries like gambling, arms and weapons, tobacco, or fossil fuel extraction. Instead, your money is used to support businesses making a positive impact in the world, often investing in firms working towards a greener environment or supporting better workers’ rights.

Like other ISAs, an ethical ISA allows you to:

• invest up to £20,000 per tax year (as of 2025/26).

• receive any dividends, interest, or capital gains free from income tax and capital gains tax.

Any investment in the stock market is more risky than a cash ISA - the value of your investments could go up and down, but there is also the potential for higher gains.

You can split your £20,000 ISA allowance between different types of ISA account (lifetime ISAs have a £4,000 limit).

What makes an investment ‘ethical’?

Ethical investing involves actively choosing companies make a positive contribution to society or have a positive environmental impact.

You can also screen out companies that conflict with your values or contribute to climate change.

Ethical stocks generally include companies demonstrating environmental and social responsibility. This is also known as ESG (environmental, social and governance), socially responsible investing or impact investing. These businesses often:

• Treat staff, customers, and suppliers fairly.

• Work towards a greener planet.

• Help to stop human suffering.

• Promote gender equality.

• Protect wildlife.

• Uphold workers’ rights.

How do green investments perform?

As with any investment strategy, the future performance of ethical investments or ESG funds is difficult to predict. So it’s not possible to say whether an ethical ISA or ESG investing will generate better returns than a regular fund.

Sustainable funds have historically seen competitive returns and while ruling out non-ethical investments may leave fewer funds to choose from, there are other advantages to ethical investments. 

For example, ethical investments may be less likely to incur fines as regulators can levy large fines against corporations that breach social or governance rules.

How should I manage my ethical ISA?

You can manage an ethical ISA in different ways, such as:

• Managing your investment account yourself

• Choosing investment funds or managed funds suggested by an ISA provider

• Employing a fund manager, investment manager or financial adviser

• Using a robo adviser to suggest an investment portfolio

How can I invest ethically?

Investing ethically involves several steps:

What are the pros and cons of green investing?

Like all investment decisions, ethical investing comes with its own set of advantages and disadvantages:

Advantages:

• Aligning investments with personal principles

• Having input into choosing the ethical funds and sectors

• Investor protection from the Financial Services Compensation Scheme (FSCS).

• Tax-free growth of ISA investments

Disadvantages:

• Potential missed returns from companies not aligned with your values

• Fees associated with ISAs

• The risk of losing value

How can I choose the best ethical investment ISA?

To choose the best ethical investment ISA, consider the following:

• What ethical considerations are most important to you

• Your level of risk tolerance and individual circumstances

• How hands-on you want to be

• The management fees associated with the ISA

• The minimum deposit

• The fund's past performance

Some investors take financial advice before making investment decisions. Others approach ethical banks such as Triodos Bank or the Co-operative Bank.

Other useful guides

If you want to learn more about investing, we have a range of guides you can read:

Stocks and shares ISA guide

Self-select ISAs explained

 Should I invest my money or save it?

Compare ethical stocks and shares ISAs with MoneySuperMarket

You can transfer from a regular stocks and shares ISA to an ethical ISA without losing the tax-free status. This allows you to align your investments with your principles without any tax implications.

You can also transfer some or all of your ethical investment ISA to a regular stocks and shares ISA without losing your tax-free status.

To stay informed about your investments, refer to Share Action for reports on how your fund manager has voted at annual general meetings. The Financial Services Compensation Scheme (FSCS) also offers investor protection should your investment platform go bust.

You can view ethical stocks and shares ISAs with MoneySuperMarket. We have a range of stocks and shares ISA options from leading UK providers.

Are you looking to transfer your ISA funds? Check out our guide for more information.