Investments & ISAs Overview

Ethical savings accounts and funds often avoid investing in industries such as tobacco, nuclear power and arms.

They may also seek to invest in 'positive' businesses like renewable energy, sustainable timber and waste management. Furthermore such funds and accounts can generate returns as healthy as their non-ethical equivalents.

If you're serious about social and environmental issues, then choosing an ethical fund or savings account represents a long-term investment, not just in your financial future but the world's future too.

Share ownership

Types of investment funds and ISAs

How do ethical funds invest

Finding a green or ethical ISA

Alternative investments

Your next steps

If you are thinking of dabbling in the stock market, or already own shares, it’s possible to shape your portfolio so that the companies you invest in match your ethical principles. In addition to selecting companies for investment on the basis of their ethical credentials, you can also use your power and influence as a shareholder to improve the ethical performance of the companies in which you invest.

However, it can be time-consuming and difficult to check up on the performance of every company you are interested in. The easiest way for ethically-minded individual investors to choose which companies to invest in is to use a fund manager or stock broker who will adhere to a set of ethical constraints. Another is to invest in a pooled fund which is guided by a green and/or ethical ethos. Different types of green and ethical investment funds and ISAs are described below.

Types of investment funds and ISAs

Ethical Funds

Also known as socially responsible investment (SRI) funds this type of investment generally seeks to avoid certain types of businesses while investing in socially and environmentally beneficial ones. Industries most commonly excluded by ethical funds include alcohol, tobacco, gambling, pornography, animal testing for cosmetic purposes, genetic engineering, intensive farming, armaments and nuclear power.

Green Tech/Climate Change Funds

These 'thematic' funds seek to invest in companies in specific sectors like renewable/alternative energy, carbon-offsetting, sustainable timber and waste management. They may not have the same attitude to certain companies as ethical funds, so it is important to check the fund isn't investing in any areas you would not approve of.

Shariah Funds

These funds may be of interest to Muslim and non-Muslim ethical investors alike, as they tend to avoid investment in areas like alcohol, tobacco, gambling and pornography. Restrictions are also in place on investing in banks or other financial institutions due to the prohibition on excessive 'gearing' or interest-charging. Non-halal and pork meat industries are also excluded.

Please note: this site does not offer financial advice or make any recommendations as to the quality or otherwise of the funds presented. We suggest that you fully consider your green and ethical requirements and speak to an independent financial advisor before committing to any investment. Our independent financial advisor search will help you find a professional ethical investment experience.

How do ethical funds invest

Funds pool together the money of hundreds of investors into a single fund, which in turn invests in the stock market. What makes a fund ethical is what it chooses to invest in. Ethical funds use screening, a 'best-in-class' approach and engagement, or a combination of each of these approaches, in their investment process.

Screening

Companies can either be 'screened in' (positive screening) or 'screened out' (negative screening) of funds based on whether they meet or breach certain criteria. On the positive side, a fund may seek to invest in companies making a positive contribution to society, say in the form of renewable energy or waste management.

On the negative side, a fund might avoid investing in certain areas deemed controversial like the tobacco, arms or fossil fuel industries, companies with poor human rights records, heavy polluters or those that test on animals for cosmetic purposes. Other funds might avoid investment in financial institutions while some, known as 'fund of funds' might invest only in other ethical funds.

Best in Class

In this case, investment decisions are made based on a company's record in relation to its peers. A fund might, for example, invest in the oil or gas sector, but only in those companies which are deemed to be the best in their class, with say, a better record on the environment and human rights than others in their sector.

Engagement

In this instance the fund's manager works with and actively encourages the companies that he or she invests in to adopt or improve social, governance and environmental practices. This can involve meetings with senior management and voting at relevant shareholder meetings, i.e. Annual General Meetings.

Finding a green or ethical ISA

An ISA (Individual Savings Account) is a tax-free savings account designed to encourage people to save money. There are two types of account: a cash ISA and a stocks and shares (equity) ISA.

The annual investment allowance is £11,520, up to £5,760 of which can be saved in cash with one provider, the rest can be invested in stocks and shares with either the same or a different provider. It is possible to transfer ISAs between accounts, though it should be noted that while it is possible to transfer a cash ISA to an equity ISA, the reverse is not allowed. From April 2010 the annual investment will rise to £10,200 (of which £5,100 can be saved in cash).

The money deposited in an ISA linked to an equity fund can be invested in companies listed on the stock market, government bonds and corporate bonds. It is therefore considered to be exposed to more risk than a cash ISA as its performance may be subject to market fluctuations. However, this type of ISA could potentially deliver greater returns in the long-term.

Equity ISAs

The number of green and ethical equity ISAs is growing all the time. There are currently around 80 green and ethical funds available, the majority of which come with an ISA wrapper.

Use our search to find an equity ISA whose policy addresses your green/ethical concerns.

Cash ISAs

A cash ISA is similar to a normal savings account except that the interest earned is exempt from tax and there is a limit on how much cash you can deposit.

If you want to invest your money in a green or ethical cash ISA you can do so with a proven green or ethical provider, i.e.:

You can also search our database of banks and building societies to find an ISA provider with the right green and ethical credentials for you.

Alternative investments

In addition to ethical funds and ISAs, there are a number of other green and ethical investment options available, including:

Triodos Renewables: is a public limited company that invests in large-scale renewable energy projects.
Newcastle Intermediary Services 'Clean Energy Select Account': is available as a direct investment or cash ISA and invests in a mixture of clean energy technology and equipment companies.
HSBC Vaccine Investment: open to consumers as an investment plan or an ISA, this product helps raise money for the GAVI Alliance (formerly the Global Alliance for Vaccines and Immunisation). It states that every £1000 invested helps immunise over 130 children from five life-threatening diseases, including Diphtheria and Hepatitis B.
Triodos Microfinance Fund: this fund provides finance to nearly 40 microfinance institutions in countries in Latin America, Africa, Asia and Eastern Europe.It is open to individual UK high-net-worth or sophisticated investors. The minimum investment amount is currently €50,000 or £50,000 depending on the share class chosen.
Big Issue Social Enterprise Investment Fund: the investment subsidiary of the Big Issue magazine has launched a new fund which target foundations, charitable investors and high-net-worth individuals. It aims to invest in social enterprises in the health and social care, environment, and employment and skills sectors and will invest between £100,000 and £500,000 in each business.
Cochabamba is a fully trading Industrial Provident Society, working in equal partnership with poor smallholders on the fringes of the Bolivian Amazon to establish and maintain a profitable and sustainable community-based forestry enterprise. Investors in the scheme provide the finance needed for local smallholders to plant native species of tropical hardwoods as an alternative to unsustainable farming practices.
The Ethical Property Company is a blue-chip social business which has operated in the UK for over ten years. Ethical Property offers the chance to invest in a genuinely triple-bottom line company, whose aim is the support and growth of the social change sector in the UK and abroad. Shares in the Company are traded on a Matched Bargain Market, designed with the Company to match buyers and sellers in real time, and operated by Brewin Dolphin Ltd. Ethical Property believes that investment should be accessible and open to all, and the Matched Bargain Market was set up with this belief in mind. Minimum investment using this mechanism is low, and therefore open to all.

Your next steps

Check out our Next Steps Guide - Investments & ISAs for further information on finding a green or ethical fund and questions you might want to ask of your existing investment managers or savings institution. Consumers can also use the sriServices StyleFinder questionnaire to analyse their approach to ethical, green or sustainable investing before meeting a financial adviser.

Resources

60 Second Guides to Investments & ISAs

Next Steps – Investments and ISAs

What do the ticks mean?

Please click on any of the funds below to find out more
Fund	Policy
Aberdeen Ethical World Fund
Aberdeen Responsible UK Equity
Alliance Trust Sustainable Future Absolute Growth
Alliance Trust Sustainable Future Corporate Bond Fund
Alliance Trust Sustainable Future European Growth Fund
Alliance Trust Sustainable Future Global Growth Fund
Alliance Trust Sustainable Future Managed Fund
Alliance Trust Sustainable Future UK Growth Fund
Alliance Trust UK Ethical Fund
Allianz RCM Global Eco Trends
Axa Ethical Distribution Fund
BlackRock New Energy Investment Trust plc
Capita CF 7IM Sustainable Balance Fund
CIS FTSE4Good Tracker Fund
CIS Sustainable Diversified Trust
CIS Sustainable Leaders Trust
CIS Sustainable World Trust
Clerical Medical Ethical Fund
Climate Assets Fund
ConBrio B.E.S.T Income Fund
Eden Tree Amity European Fund
Eden Tree Amity International Fund
Eden Tree Amity Sterling Bond Fund
Eden Tree Amity UK Fund
Engage Mutual FTSE4Good Fund
F&C Ethical Bond Fund
F&C Stewardship Growth Fund
F&C Stewardship Income Fund
F&C Stewardship International Fund
Family Charities Ethical Trust
First State Asia Pacific Sustainability Fund
FL Ethical Safeguard Optimiser Fund
FL Stewardship Corporate Bond Life Fund
FL Stewardship Income Life Fund
FL Stewardship International Life Fund
FL Stewardship Life Fund
FL Stewardship Managed Life Fund
FL Stewardship Managed Pension Fund
FL Stewardship Pension Fund
Guinness Alternative Energy Fund
Halifax Ethical Fund
Henderson Global Care Growth Fund
Henderson Global Care Managed Fund
Henderson Global Care UK Income Fund
HSBC Amanah Global Equity Index Fund
IM WHEB Sustainability Fund
Impax Environmental Markets (Ireland) Fund
Impax Environmental Markets plc
Jupiter Ecology Fund
Jupiter Green Investment Trust PLC
Jupiter Responsible Income Fund
Kames Ethical Cautious Managed Fund
Kames Ethical Corporate Bond Fund
Kames Ethical Equity Fund
Legal & General Ethical Trust
Ludgate Environmental
Old Mutual Ethical Fund
Premier Ethical Fund
Rathbone Ethical Bond Fund
Royal London Ethical Bond Fund
Royal London UK Ethical Equity Fund
Schroders Global Climate Change Fund
Scottish Life UK Ethical Pension Fund
Scottish Widows Environmental Investor Fund
Scottish Widows Ethical Fund
SLFC Green Fund
Sovereign Ethical Fund
Standard Life Ethical Corporate Bond Fund
Standard Life Ethical UK Life Fund
Standard Life European Equity Ethical Fund
Standard Life UK Ethical Fund
Standard Life UK Pension Ethical Fund
SVM All Europe SRI Fund
SWIP Islamic Global Equity Fund
The Quadris Environmental Forestry Fund PCC PLC
The Socially Responsible Investment Fund PCC
Virgin Climate Change Fund

What do the ticks mean?

Green / Ethical Fund

Fund Overview
Investment Approach
Breakdown
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Alliance Trust Sustainable Future Corporate Bond Fund

The Alliance Trust Sustainable Future Corporate Bond Fund is available to retail investors as an OEIC (Open-Ended Investment Company) with an ISA wrapper.

The Fund aims to provide a higher long-term return than that provided by UK Government bonds. Most of the returns are likely to be in the form of income. It should have at least 80% invested in a broad range of higher quality bonds which are seen to have less risk and so usually offer lower returns. It may invest in global bonds issued by companies, governments and large international organisations. Normally 80% of the bonds in the Fund will be priced in Sterling, or hedged to Sterling. It will invest only in companies that meet Alliance Trust’s sustainability criteria.

Alliance Trust aims to invest in diversified portfolios of companies that are more sustainable than the market, have good business fundamentals and are undervalued. Alliance Trust has four main investment themes to indentify companies providing potential solutions to a diversified range of sustainability challenges such as: climate change and energy efficiency, environmental protection and resource efficiency, quality of life and governance and risk management. Alliance Trust uses its influence as investors to engage with companies to improve their management of environmental, social and governance issues to the benefit of the business and what the company is worth, as well as the environment and society in which they operate.

Please note ISA is available on the Alliance Trust Savings Platform. The minimum amount is waived for Alliance Trust Savings customers only, for further information please visit - www.alliancetrustsavings.co.uk

Company Info

Fund Provider

Alliance Trust Investments

Fund Manager

Stuart McMaster

Website

http://www.alliancetrustinvestments.com/

Email

ati@alliancetrust.co.uk

Phone

0808 234 1888

Fund Type

OEIC

Sector

UK Other Bond

Launch Date

February 2001

Alliance Trust Sustainable Future Corporate Bond Fund

Positive Screening

The Sustainable funds seek to invest in companies whose core business and operational processes address environmental and social problems. Examples are:

Resource shortages
Climate change
World health
Human rights abuses
Renewable or low-emission energies
Healthcare
Education
Waste recycling

Negative Screening

The fund will not invest in companies involved in the following:

· Alcohol

o Only invest in alcohol companies that have policies and practices to address responsible marketing, consumption and sale of their products.

· Animal welfare

o Excludes companies that derive >10% of turnover from the provision of animal testing services

o Excludes companies that derive >10% of turnover from;

§ the manufacture of cosmetics or cosmetic intermediates that are tested on animals

§ retail sale of own-brand cosmetics that are tested on animals

§ manufacture of household products that are tested on animals unless the company policies and programmes to minimise testingare considered good practice.

· Climate change

o Excludes companies that derive >10% of turnover from airports, airlines or cars powered by the internal combustion engine.

o Excludes oil and gas companies whose reserves are typically under 70% natural gas, or which have more than 10% of reserves in oil sands, or are drilling offshore in the Arctic.

o For companies that derive >10% of turnover from the production of energy intensive materials and other high impact activities, we expect management to have introduced substantive steps to minimise greenhouse gas emissions.

· Deforestation

o Excludes forestry and paper companies that do not have policies and practices in place to ensure that forests are managed in a sustainable way.

o Excludes companies that are involved in the deforestation of primary or virgin forest or illegal logging practices.

· Gambling

o Excludes companies that derive >10% of turnover from the management or ownership of gambling facilities.

· Genetic engineering

o Excludes companies involved in the uncontrolled release of genetically engineered organisms into the environment

· Human rights

o Assess companies on a case-by-case basis and encourage those that are operating in weak governance zones to demonstrate their commitment to the integration of human rights standards into business practices and to put in place appropriate human rights policies, systems and reporting.

o Exclude companies judged not to be addressing serious allegations (narrowly interpreted) of violations of international human rights laws and standards including the OECD Guidelines for Multi-National Enterprises (2000) and the UN Global Compact (2000), among others.

· Infrastructure projects

o Excludes companies that are directly involved in the construction of large dam projects in developing countries if those projects have not met best practice standards.

o Will only invest in companies involved in the building of large scale infrastructure projects such as roads, airports or dams if they are viewed as leaders within their sector with respect to stakeholder dialogue, environmental management and social and environmental impact assessment.

· Intensive farming

o Excludes companies that derive >10% of turnover from intensive meat and fish farming.

o Excludes companies that derive >10% of turnover from the manufacture of chemical pesticides.

o Excludes companies that derive >10% of turnover from the fur trade.

· Labour standards

o Assess companies on a case-by-case basis, and encourage those that are operating in weak governance zones to demonstrate their commitment to the integration of international labour standards into business practices by putting in place appropriate labour standards policies, systems and reporting.

o Exclude companies judged not to be addressing serious allegations (narrowly interpreted) of breaches of labour standards such as those on child labour, forced labour, discrimination, union rights, working hours and health & safety.

o The international laws and standards, which we refer to when making this assessment, include the eight conventions which are regarded and promoted by the ILO as “core” conventions. In summary these are:

§ Child labour

§ Equal opportunities

§ Forced labour

§ Freedom of association/Collective bargaining

· Nuclear

o Excludes companies that derive >10% of turnover from owning or operating nuclear power stations, unless the company has made significant investment (>10% generation capacity) in renewable energy and does not have the option to divest their nuclear capacity².

o Excludes companies that derive >10% of turnover from uranium mining or reprocessing of nuclear fuel.

o Excludes companies that derive >10% turnover from the development or manufacture of non-safety related products for nuclear power plants.

· Ozone depleting substances

o Excludes companies that derive >10% of turnover from the manufacture or sale of ozone depleting substances.

· Pornography

o Excludes companies that derive >10% of turnover from the production or distribution of pornographic material.

o Excludes companies that derive >10% of turnover from owning or operating adult establishments.

· Tobacco

o Excludes companies that derive >10% of turnover from the manufacture or sale of tobacco products.

· Weapons systems

o Excludes companies that are major producers of full weapons systems or critical components of weapon systems. Major producers are defined as having >10% of turnover and/or >£100m revenue from offensive weapons systems.

o Excludes companies with confirmed involvement in the manufacture of anti-personnel mines or cluster munitions, or their critical components, as defined by the Ottawa Mine Ban Convention and the Oslo Convention on Cluster Munitions.

Voting

The fund applies the 'Alliance Trust SRI' policy. This policy requires adherence to the best-practice codes of conduct on composition of the board, tenure of director appointments, and remuneration structures. The funds maintain the right to vote against weak disclosure or environmentally or socially damaging proposals where they believe the company is exposing itself to unnecessary risk.