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.
Types of investment funds and ISAs
Finding a green or ethical ISA
Share ownership
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 £7200, £3600 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 90 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.
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.
Investments & ISAs Search
Green / Ethical Fund
Aviva Investors Sustainable Future Global Growth Fund
The Aviva Investors Sustainable Future Global Growth Fund is available to retail investors as an OEIC (Open-Ended Investment Company) with an ISA wrapper.
Global sustainable development is the key area of concern to the Sustainable fund family. The funds seek out investment in companies whose core business and operational processes address environmental and social problems (see Investment Approach section) and will not invest in companies or sectors which are believed to be in conflict with environmental and social sustainability (see negative screening criteria).
Each company is awarded an SRI rating, based on an analysis of its core business (what it does) and the processes and practices employed (how they do it). This process was developed by the Aviva Investors SRI team to provide a link between the definition of their investment-worthy universe and their SRI criteria with the intention of promoting transparency. The funds also apply a ‘best in sector’ approach to fund selection.
Company Info
Fund Provider
Aviva Investors UK Funds Ltd
Fund Manager
Mike Appleby
Website
http://www.avivainvestors.co.uk/
fundandsalessupport@avivainvestors.co.uk
Phone
0800 0154 773
Fund Type
OEIC
Sector
Global Growth
Launch Date
February 2001
Aviva Investors Sustainable Future Global Growth 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 - though will consider investment in companies that adopt policies and practices to address responsible marketing, consumption and sale of their products
- Animal welfare - the funds will not invest in companies that derive more than 20% of turnover from the provision of animal testing services or that test or commission testing on chimpanzees, primates or are involved in transplanting organs from animals to humans. Companies that use animal testing to manufacture or develop non-medical products are also excluded
- Climate change - the funds exclude companies that derive more than 20% of turnover from airports, airlines or cars powered by the internal combustion engine and companies that derive more than 20% of turnover from the production of energy intensive materials (e.g. steel, cement) unless there are substantive steps to minimise greenhouse gas emissions. The funds will not invest in oil and gas companies whose reserves are under 60% natural gas reserves
- Deforestation - the funds will not invest in forestry and paper companies unless they have policies and practices in place to ensure that forests are managed in a sustainable way
- Ozone depleting substances - the funds will not invest in companies that derive more than 20% of turnover from the manufacture of ozone depleting substances
- Gambling - the funds will not invest in companies that derive more than 20% of turnover from the management or ownership of gambling facilities
- Genetic engineering - the funds will not invest in companies involved in the commercial release of genetically engineered organisms
- Human rights - the funds will not invest in companies that consistently violate international human rights standards
- Intensive farming - the fund excludes companies that derive more than 20% of turnover from the manufacture of chemical pesticides and companies that derive more than 20% of turnover from intensive meat farming
- Nuclear - the funds exclude companies that derive more than 20% of turnover from owning or operating nuclear power stations or that derive more than 20% of turnover from uranium mining or reprocessing of nuclear fuel. The fund also excludes companies that derive more than 20% of turnover from the development or manufacture of non-safety related products for nuclear power plants
- Pornography - the funds exclude companies that derive more than 20% of turnover from the production or distribution of pornographic material and that derive more than 20% of turnover from owning or operating adult establishments
- Tobacco - the funds will not invest in companies that derive more than 5% of turnover from the manufacture of tobacco products
- Weapons systems - the funds will not invest in companies that derive more than 5% of turnover from the manufacture or sale of armaments, weapon systems or critical components of weapon systems
Voting
The fund applies the 'Aviva Investors Corporate Governance' policy. This policy requires adherence to the best-practice codes of conduct on composition of the board, tenure of director appointments, and remuneration structures and requires UK FTSE 100 companies, and those mid-cap companies in environmentally sensitive areas to publish a robust environmental report as part of the company's annual report and accounts. If such a report is not forthcoming, Aviva Investors will vote against accepting that company's report and accounts at their AGM. Aviva Investors also maintain the right to vote against environmentally or socially damaging proposals where they believe the company is exposing itself to unnecessary risk.
In 2007 Aviva Investors (then Morley Fund Management) voted at 482 AGMs for FTSE 350 and FTSE EuroFirst 300 Index companies. Of those it voted against or abstained on approving a company’s Reports and Accounts for 88 companies based on ESG criteria.
The funds’ voting practice is disclosed online.
Engagement
The funds engage with companies on environmental, social and corporate governance policies. The main engagement themes are currently climate change, human rights, environment and safety, transparency and globalisation.
Engagement takes the form of meetings with companies, site visits and correspondence via letters, emails and phone calls.
In a recent example of engagement, an Aviva Investors-led group of 38 members of the international investor coalition wrote to the CEOs of 130 major listed companies (all of which are signatories to the UN Global Compact) with a set of 10 principles of corporate responsibility. By joining the UN Global Compact the companies commit to produce an annual corporate responsibility report known as a ‘Communication on Progress’ (COP).
Twenty-five of the companies have been praised by the investors for producing a notably high-quality COP such as Allianz SE and Starbucks, while over 100 companies were singled out as laggards in this area for failing to submit any COP this year. Laggards include companies such as Severn Trent plc and LVMH.
More generally, if a company fails to respond to raised issues, the fund manager may use its shareholder vote to encourage change. The fund manager would consider filing resolutions on social, environmental and governance issues where it feels that management failure to address an issue jeopardises the interests of shareholders. Aviva Investors may exclude companies from its portfolios on the basis of poor management of social, environmental governance issues regardless.
Research
Research is conducted in-house by a team of SRI analysts. An independent committee is in place to review research, while the sustainability ratings are reviewed on a quarterly basis.
Divestment Policy
If a company's product or management rating is downgraded and no longer meets the minimum criteria for investment in the Sustainable Future funds, the fund managers must sell the stock within six months. Where applicable the manager will engage with a company before divesting to see if it can get a commitment from management.
Up to date info found
Company Info
Fund Provider
Aviva Investors UK Funds Ltd
Fund Manager
Mike Appleby
Website
http://www.avivainvestors.co.uk/
fundandsalessupport@avivainvestors.co.uk
Phone
0800 0154 773
Fund Type
OEIC
Sector
Global Growth
Launch Date
February 2001
Aviva Investors Sustainable Future Global Growth Fund
Fund Size £
£108m (05/09)
Charges
| Initial Charge | 4.00% |
|---|---|
| Annual Charge | 1.50% |
| Exit Free | no |
Products
| Products Available | Min Lump Sum (£) | Min Monthly (£) |
|---|---|---|
| Unit Trust/OEIC | £1000 | £50 |
| ISA | £1000 | £50 |
Top Holdings
| 1 | CVS Caremark |
|---|---|
| 2 | Centrepoint |
| 3 | Fresenius Medical Care |
| 4 | Pearson |
| 5 | Novo Nordisk |
| 6 | Statoil Hydro |
| 7 | Cisco Systems |
| 8 | Gilead Sciences |
| 9 | Roche Holding |
| 10 | Encana |
Asset Allocation
| Equities | 98.98 |
|---|---|
| Bonds | 0 |
| Cash | 1.02 |
Sector Weighting
| Non Classified | 1.05% |
|---|---|
| Materials | 4.21% |
| Consumer Staples | 5.51% |
| Telecommunications | 6.45% |
| Consumer Discretionary | 6.71% |
| Financials | 11.65% |
| Industrials | 11.70% |
| Utilities | 12.11% |
| Information Technology | 13.69% |
| Healthcare | 16.36% |
Company Info
Fund Provider
Aviva Investors UK Funds Ltd
Fund Manager
Mike Appleby
Website
http://www.avivainvestors.co.uk/
fundandsalessupport@avivainvestors.co.uk
Phone
0800 0154 773
Fund Type
OEIC
Sector
Global Growth
Launch Date
February 2001
