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
Henderson Industries of the Future Fund
The Henderson Industries of the Future Fund is available to retail investors as an OEIC (Open-Ended Investment Company) with an ISA wrapper and an associated Child Trust Fund.
The fund invests globally in equities. Investments are selected according to the fund's social, ethical and environmental criteria which incorporate positive selection, ethical exclusion and engagement. The fund takes a thematic approach, investing exclusively in companies that provide solutions to sustainability challenges. These challenges are categorised into 10 ‘Industries of the Future’ themes. The fund also adheres to ethical exclusion criteria which prohibit investments in a range of activities as detailed in the Investment Approach section.
Companies are evaluated and rated according to their corporate responsibility performance and must meet a specified absolute performance level (i.e. not relative to their peers) to be considered acceptable for the fund. Engagement is carried out to enhance our investment decision making and influence companies to improve practices.
Company Info
Fund Provider
Henderson Global Investors
Fund Manager
Tim Dieppe
Website
Phone
020 7818 1818
Fund Type
OEIC
Sector
Global Growth
Launch Date
February 2005
Henderson Industries of the Future Fund
Positive Screening
This fund invests in 'Industries of the Future' in the following ten product themes:
Environmental
- Cleaner Energy - sources of energy that help pave the way to a ‘hydrogen economy’
- Efficiency - products and processes that reduce energy consumption
- Environmental Services - goods and services that improve the quality of the environment and reduce pollution and waste
- Sustainable Transport - shifting to less polluting forms of transport, and cleaner transport technologies
- Water Management - managing and conserving water, and minimising pollution
Social
- Health - goods and services that help people live longer, healthier lives
- Knowledge - supplying educational goods and services
- Quality of Life - goods and services that promote sustainable lifestyles among all age groups
- Safety - minimising the risk of safety incidents at work, at home and in the community
- Social Property & Finance - providing property for social benefit, access to housing, regeneration, and better and wider access to financial services
This fund also evaluates companies on their corporate responsibility practicies, assessing them on a range of generic as well as sector specific CR issues which falling within four broad categories:
Corporate Standards e.g.
- Corporate governance policies and performance
- Ethical business policies and performance
Workplace e.g.
- Employee involvement and relations
- Equal opportunities and diversity
- Health and safety policies and performance
Social e.g.
- Human rights in business operations and supply chains
- Access to essential goods
- Community impacts
Environmental e.g.
- Environmental policies, management systems and disclosure
- Management of climate change, pollution, resource use and biodiversity
Negative Screening
The fund will not invest in companies involved in the following:
|
Alcohol |
Companies producing alcoholic beverages or deriving more than a third of their revenues from the sale of alcohol. |
|
Animal testing |
Companies involved in animal testing for cosmetic products. Companies may be considered for investment where animal testing is legally required, for example, medical products. |
|
Armaments |
Companies producing strategic military goods and services. |
|
Automotive industry |
Companies manufacturing private or commercial road vehicles except where such activities are considered to be consistent with the sustainable transport theme (e.g. electric vehicles). |
|
Chemicals |
Companies manufacturing chemical products which are subject to bans or severe restrictions in major markets around the world or referenced by internationally agreed lists (e.g. the Rotterdam Convention) and seek at all times to operate to the highest standards available. |
|
Forestry |
Companies involved in unsustainable timber extraction or trading. |
|
Gambling |
Companies deriving turnover from gambling. |
|
Genetic engineering |
Companies involved in the deliberate release of genetically modified organisms (e.g. animals or plants). Medical and industrial applications in a contained setting will be assessed on a case-by-case basis. |
|
Greenhouse gas emissions |
Companies which are major contributors to climate change, unless they show a responsible approach to reducing emissions. |
|
Intensive farming |
Companies involved in intensive farming, fish farms or abattoirs. |
|
Nuclear power |
Companies involved in nuclear energy production or manufacturers of nuclear equipment (except safety equipment). |
|
Pornography |
Companies which publish, print or distribute pornography. |
|
Road building |
Companies deriving more than a third of their revenue from road building. |
|
Tobacco |
Companies producing tobacco products or generating more than a third of their revenue from the sale of tobacco products. |
Voting
The SRI funds have a policy of actively voting its shares in all geographies where possible, to promote high standards of corporate governance and corporate responsibility.
Voting information for the SRI funds is reported in the Eurosif Transparency Guidelines.
An example of recent voting was the support of a shareholder resolution which proposed establishing a board-level sustainability committee at Apple Computer Inc.
Engagement
The SRI Team undertakes three forms of company engagement:
- The first is ‘baseload’ engagement, where it seeks regular updates from companies on their corporate responsibility, and which are prioritised according to the size of the company in the SRI funds
- Second is ‘thematic’ engagement, where it selects an issue of importance and undertake research and engagement with a number of companies to compare and contrast approaches; and
- Third is ‘reactive’ engagement, engaging with companies in the wake of events which raise concerns, and which are prioritised by the severity of the issue at stake
The SRI research team, assisted by the Corporate Governance Manager undertakes engagement on behalf of the funds. Typical engagement activities are dialogue through meetings, conference calls, telephone calls or written communications.
In addition, the fund also engages in policy dialogue or strategic engagement with the aim of helping to shape the market so that sustainable and responsible behaviour is rewarded. Such engagement may be proactive or reactive in nature.
An example of company engagement involves Philips Electronics, with whom the SRI team engaged with on the company’s strategy regarding electronic waste and recycling. The company has now initiated pilot projects in these areas and is in the process of conducting a review of its environmental sustainability. Another is that of ABB, a European company was which presence in Sudan, a company will a poor human rights record. We engaged with the company to evaluate the risks and benefits of operating in such a company, and encouraged them to consider exiting the country. Following our efforts, the company no longer operates in Sudan.
In terms of strategic engagement, Henderson engaged with a number of companies on the Carbon Disclosure Project to encourage them to respond.
Research
Research is conducted in-house, using a range of resources ranging for reviewing publicly available information, information obtained from specialist third party providers, as well as dialogue with companies, NGOs, unions, and independent experts.
Companies are reviewed as part of a regular cycle to ensure they continue to be suitable for investment.
The team’s research and engagement efforts are guided by the input from an independent SRI Advisory Committee of sustainability experts.
Divestment Policy
Companies are divested if business activity falls under one of the excluded activities or if its corporate responsibility practice becomes unacceptable. If the company that is having its approval status revoked is currently held in a fund, the fund manager has a three month period in which to divest of the holding. If a longer period is required, this is evaluated and agreed on a case by case basis. This is to ensure the fund does not incur any unnecessary financial costs.
Up to date info found
Company Info
Fund Provider
Henderson Global Investors
Fund Manager
Tim Dieppe
Website
Phone
020 7818 1818
Fund Type
OEIC
Sector
Global Growth
Launch Date
February 2005
Henderson Industries of the Future Fund
Fund Size £
£82.18m (12/09)
Charges
| Initial Charge | 5.00% |
|---|---|
| Annual Charge | 1.50% |
| Exit Free | no |
Products
| Products Available | Min Lump Sum (£) | Min Monthly (£) |
|---|---|---|
| Unit Trust/OEIC | £1000 | £50 |
Top Holdings
| 1 | Mednax |
|---|---|
| 2 | Qiagen |
| 3 | Schneider Electric |
| 4 | Agilent Technologies |
| 5 | Danaher |
| 6 | Fresensius |
| 7 | ABB |
| 8 | Quest Diagnostics |
| 9 | Amedisys |
| 10 | Roper Industries |
Asset Allocation
| Equities | 90-100% |
|---|---|
| Bonds | |
| Cash | 0-10% |
Sector Weighting
| Consumer Goods | 2.60% |
|---|---|
| Other services and Businesses | 2.60% |
| Basic Materials | 3.60% |
| Utilities | 4.40% |
| Cyclical Services | 6.20% |
| Consumer Services | 8.10% |
| Non -Cyclical Consumer Goods | 11.10% |
| Healthcare | 13.90% |
| General Industrials | 14.20% |
| Industrials | 24.70% |
Company Info
Fund Provider
Henderson Global Investors
Fund Manager
Tim Dieppe
Website
Phone
020 7818 1818
Fund Type
OEIC
Sector
Global Growth
Launch Date
February 2005
