All you need to know about ethical investments
If social responsibility is important to you, then you could make a difference with an ethical ISA. Your investment could go towards funding companies that value the environment, sustainability and fair business practice. Our guide explains more….
Key takeaways
Ethical companies prioritize fair treatment, environmental sustainability, human rights, gender equality, wildlife protection, and workers’ rights
Ethical investments may avoid regulatory fines and adapt to new legislation
Consider your ethical priorities, risk tolerance, involvement level, fees, minimum deposit, and fund performance

What is an ethical ISA?
An ethical ISA is an investment account 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.
Identifying ethical stocks
Ethical stocks generally include companies demonstrating environmental and social responsibility. 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.
In contrast, stocks considered unethical typically belong to industries such as alcohol, gambling, arms, tobacco, fur trade, and pornography.
Performance of green investments
As with all investments, future performance is difficult to predict, so it’s not possible to say whether an ethical ISA 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.
Ethical investments may be less likely to incur fines as regulators can levy large fines against corporations that breach social or governance rules. They often stay one step ahead of regulators due to constantly introduced legislation.
Managing your ethical ISA
The management of an ethical ISA portfolio can be done in different ways, depending on your preferences. You can manage it yourself, employ a fund manager, or use a robo adviser. Whichever method you choose, stay informed about your investments and ensure they continue to align with your ethical stance.
How to invest ethically
Investing ethically involves several steps:
Pick a cause:
Decide what matters most to you.
Choose what to avoid:
Identify the industries and practices you want your money to steer clear of.
Research the fund:
Understand its policies, track record, and performance.
Diversify your portfolio:
Spread your investments across different sectors and companies.
Pros and cons of green investing
Like all investment decisions, ethical investing comes with its own set of advantages and disadvantages:
Advantages include:
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 include:
Potential missed returns from companies not aligned with your values
Fees associated with ISAs
The risk of losing value
Choosing the best ethical investment ISA
When selecting an ethical investment ISA, consider what ethical considerations are most important to you, your level of risk tolerance, how hands-on you want to be, the fees associated with the ISA, the minimum deposit, and the fund's past performance. Remember, thorough research is crucial before investing.
Other useful guides
If you want to learn more about investing, we have a range of guides you can read:
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.