Ethical Investment Funds

In this guide we investigate, score and rank the ethical and environmental records of 20 green and ethical investment funds.

We look at how to choose an ethical fund, transparency, carbon footprints, returns on investment, alternative investment methods, and give our Best Buy recommendations.

About Ethical Consumer

This is a product guide from Ethical Consumer, the UK's leading alternative consumer organisation. Since 1989 we've been researching and recording the social and environmental records of companies, and making the results available to you in a simple format.

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What to buy

What to look for when choosing an ethical fund:

  • Is it fossil fuel free? Moving your money to a fund that does not invest in fossil fuels can greatly reduce your carbon impact.

  • Is the fund transparent? If a fund is not transparent about its investments then your money could be invested in unethical companies. Look for funds that have a clear ethical investment policy and declare all the companies they are invested in.

Subscribe to see which companies we recommend as Best Buys and why 

What not to buy

What to avoid when choosing an ethical investment fund:

  • Does it invest in unethical sectors? If a fund does not have a clear screening and exclusions policy then it is likely to be invested in unethical sectors such as fossil fuels or arms.

  • Is it owned by an unethical company? Some funds may appear ethical, but are owned by a company which also manages unethical funds. Choose a fund owned by a company that is wholly focused on ethical investment.

Subscribe to see which companies to avoid and why

Score table

Updated live from our research database

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Brand Score(out of 20) Ratings Categories Positive Scores

Our Analysis

Investment can be a tricky area to get your head around, before you even begin to think about ethics.

Most of us will have bank accounts and some will hold investments, either because we have a pension, or because we have chosen to invest savings in an  investment fund. 

In this guide we explore and explain some of the key issues in the world of investment funds and highlight some of the most ethical funds on the market.

What is an investment fund?

An investment fund is a pool of money used to invest in companies or assets with the aim of making financial returns, usually in the long run.

Putting your money in a pooled investment fund allows you to invest across a large number of companies. This spreads risk more effectively but does not mean that investment funds are risk-free. As nearly every investment site will tell you: investing carries risk and you could lose your money.

For pooled ethical funds, it also means you need to agree with all the other investors what the ethical criteria should be. 

All the options in our guide are investment funds, with the exception of Impax’s Environmental Markets Plc, which is a trust, this being the only investment option that Impax offers its UK customers. 

An investment trust works in a very similar way to an investment fund, but is set up as a publicly listed company. Investing your cash in an investment trust means buying shares in the trust as you would any other company on the public stock exchange.

Another option for investing your money ethically is through direct investment platforms.

Choosing an ethical investment fund

The scoretable above ranks twenty of the most popular ethical funds from the biggest providers, as well as some of the most important carbon divested funds available.

However there are thousands of pooled funds on the market, and more than two hundred of them in the UK carry the name ‘ethical’ or ‘sustainable’.

There are 4 main questions to ask of an ethical fund before parting with your money:

Funds should have criteria that guide which type of companies it invests in.

Look for funds that have a stringent exclusions policy detailing which sectors and companies it will not invest in. For example, most ethical funds will not invest in the arms sector or tobacco companies.

Also look for what sectors and companies a fund will invest in. An ethical fund might focus on investing in healthcare or companies working in low-carbon sectors.

The 3D table contains four columns that identify some of the key concerns of Ethical Consumer readers (fossil fuels, banks, animal testing, and arms). This data comes from 3D Investing and is not based on investment criteria but on actual investments held by each fund.

At Ethical Consumer we always ‘follow the money’, so our analysis is primarily aimed at the ultimate owner of a company or a fund. You may have found a fund that appears ethical, but it might be owned by a company that also has its fingers in less ethical pies.

Some companies in this guide are relatively small and independent, such as WHEB, whereas others are linked to far larger corporations, such as Kames, which is owned by Aegon.

Examining a fund’s historical performance may give an idea of the strength of a given fund, but it certainly doesn’t give definite assurance about how it will perform in future. After all, if past performance was the only factor necessary to consider, it may seem sensible to bet that a turkey which had shown rapid growth throughout the past year will continue to grow past December 25th.

Nevertheless, we have included the average performance of the funds featured in this guide on the 3D Investing table below.

Once you have identified a potential fund, check whether it discloses all its investments. Some funds will only disclose the top-ten investments, but a fund that is serious about transparency will disclose all the companies it invests in.

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Returns from ethical investment funds

Some ethical funds have now been around for nearly 40 years in the UK, and financial returns from them have generally been much better than money saved in bank accounts.

There is growing evidence to show that investing ethically is not at odds with making reasonable returns – a concern that has previously been common.

Research published in June by the global investment company Morningstar found that sustainable investment funds frequently outperform their traditional counterparts. The study analysed nearly 4,900 funds domiciled in Europe and found that nearly 59% of the sustainable funds performed better than the average traditional fund.

These funds also have generally fared better during the COVID-19 crisis – in part because they are not heavily invested in oil and other fossil fuels. The current performance of the funds in our guide appears in the score table above.

Getting independent financial advice

If this is an area that you are unfamiliar with, it may be useful to consult an independent financial advisor (IFA) that specialises in ethical investment.

See our guide to choosing an ethical independent financial advisor

The carbon footprint of investment funds

In light of the climate emergency, there is increasing pressure on investment funds to disclose the carbon emissions of their portfolios (often referred to as Scope 3 emissions) because this is where their main carbon impact lies.

In 2014, the Montreal Carbon Pledge was launched, supported by the United Nations and Principles for Responsible Investment. It called for investment funds to commit to measure and publicly disclose the carbon footprint of the companies in their investment portfolios on an annual basis. It argued that this would allow funds to identify priority areas and actions for reducing emissions, track progress, and make comparisons to global benchmarks.

Measuring the carbon footprint of an investment portfolio is no easy feat because it is heavily reliant on the companies in that portfolio having measured their own carbon emissions. But demanding that companies measure their carbon footprint should be an important part of an investment fund’s engagement, and many of the funds we analysed stated that they were doing this.

In 2019, the hedge fund TCI made the news by warning companies that it would vote against company directors if carbon emissions were not disclosed.

The manager of TCI stated: "Investing in a company that doesn’t disclose its pollution is like investing in a company that doesn’t disclose its balance sheet."

Triodos is not a signatory to the Montreal Pledge but is one of the sector leaders in terms of its carbon disclosure. It has been working with the Partnership for Carbon Accounting Financials (PCAF) to develop a robust and extensive methodology for disclosing its carbon impact. Much more detail about this approach is available on its website.

Among the companies in our guide, the following were signatories to the Montreal Carbon Pledge:


cartoon: stranded assets pun two asses stranded on an island

Stranded Assets

The concept of stranded assets is an important element of the financial argument against investing in fossil fuels. An asset (a thing you can own) becomes stranded if it can no longer be used.

For example, it is reasonably likely that, at some point in the future, the burning of fossil fuels will be greatly limited or not possible at all, either because doing so has become so morally reprehensible or because governments have implemented strict regulations in order to control carbon emissions.

Anyone holding fossil fuel assets would be in possession of assets that cannot be used, i.e. ‘stranded’, resulting in financial losses. To invest in fossil fuels is therefore not only morally unsound but also financially foolish.


What is ESG?

The term ‘ESG’ is one you may come across when looking for ethical funds. It stands for Environmental, Social and Governance, and refers to a number of issues that funds should be taking into account.

It is usually found in the pages of corporate sustainability reports shortly before AGMs, nesting between photos of clean-energy windmills and poor-but-seemingly happy children from some low-income country.

While it is most certainly a good thing that ESG has become common in the world of finance,  some companies seem to think that just mentioning the phrase a few times is enough to be able to say you’ve dealt with it.

About our Ratings for Investment Funds 

We teamed up with the 3D Investing research project in order to provide additional information to the tables produced by Ethical Consumer.

3D Investing, now part of Square Mile Research and Consulting, in our opinion provides the best and most detailed analysis of the companies actually held in pooled ethical funds available in the UK. The 3D rating is based on an assessment of funds in five key areas:

  1. Quality of sustainability management
  2. Avoidance of ethical controversy
  3. Social impact
  4. Financial performance
  5. Transparency

According to its founder, John Fleetwood, "3D Investing rates funds on a philosophy of ‘Do good, avoid harm and lead change’. This philosophy will remain the same, but the 5-star rating methodology will shortly move to a different basis."

Carbon ratings for investment funds

Moving your money is one of the most effective actions you can take to reduce your carbon footprint. As fossil fuels are responsible for such a large proportion of carbon emissions, we believe that it is essential to choose investment funds that do not invest in fossil fuels.

Also see our guide to Fossil Free investment Funds. 

On the scoretable, all investment funds that were free of fossil fuel investments received a Product Sustainability mark and are marked with [C]. A total of fourteen funds were fossil fuel free, but only three companies (Impax, Triodos, and WHEB) received our best rating according to our new Carbon Management and Reporting category, which is represented in the Climate Change column.

To be awarded a best rating we expected the whole company, not simply the fund, to meet a number of stringent criteria. These included reporting on their current carbon emissions, setting targets in line with international agreements, and not being involved in any projects that were considered particularly damaging in terms of climate change, such as investing in fossil fuel companies.

Many funds received a Product Sustainability Mark because the featured fund was fossil fuel free, but fell down in the Carbon Management and Reporting category because they were found to invest in fossil fuel companies in other funds under their management. Subscribers can see the detail of these new ratings through the scores tables in the online versions of these guides.

Transparency ratings for investment funds

When we examine investment funds, we rate them against the usual criteria that we apply to other companies, such as tax and environmental reporting. But we also want to rate them on the companies they invest in.

We did this first by rating them according to their transparency and engagement policies.

According to our assessment of these policies and disclosures, a company was placed in one of four categories. Companies that are not rated ‘Top of the pile’ for their transparency and engagement will generally receive comparatively much lower scores because they have been marked down according to the companies they invest in, many of which do not fare well against our strict rating system.

a) Top of the pile

Aegon, AXA, BMO, Castlefield, Legal & General, Royal London, Sarasin & Partners, Standard Life / Aberdeen Asset Management, Triodos, and WHEB

  1. A clear investment, engagement and voting policy, which includes consideration of ethical risks, with 
  2. full or extensive disclosure of voting history, and
  3. a clear statement that these policies apply across all the assets under management.

If a fund was marked as 'Top of the pile' we did not mark it down for the specific investments it held, even if it held investments in companies that scored badly according to our ratings. This is because the fund was considered to have strong engagement and transparency and so was considered to be using its influence to improve companies it was invested in.

b) Getting there

AllChurches Trust (EdenTree), Impax Asset Management, Janus Henderson, Jupiter Asset ManagementKames (owned by Aegon), Liontrust Asset Management, Quilter Cheviot, Rathbone Brothers, Scottish Widows, SVM Asset Management

Some details of ethical investment, engagement and voting policies, with limited disclosure of voting history.

c) Vague/unsubstantiated

Industrivarden (LF Heartwood Growth)

Some reference to an ethical voting policy or engagement strategies, or a published stewardship statement, but more information required to assess how robust they are. No voting, or voting disclosure for a single subsidiary only.

Any 'Getting there' or ‘Vague/ unsubstantiated’ fund was marked it down for its investments according to information on our database. For example, if a fund held shares in a company that received our worst rating for animal testing then we would mark the investment company down by half a mark in the Animal Testing category.

d) Bottom of the pile

None of the funds in the scoretable got this rating. 

This category would be for funds where no information on ethical investment, engagement or shareholder voting policies could be found.

Company Ethos ratings for funds

Four companies received additional scores for the company ethos. WHEB and Triodos received a whole Company Ethos mark as both are Certified B Corporations.

They also focused solely on providing services considered to be social and/or environmental alternatives. Impax received half a Company Ethos mark for only investing in companies that are “Well positioned to benefit from the transition to a more sustainable global economy.”

Royal London received half a Company Ethos mark because it is owned by Royal London Mutual Insurance Society Limited which, rather obviously, is a mutual organisation.

Company profile

Triodos Bank was founded in the Netherlands in 1980 and now has branches in a number of European countries. Its name stems from Ancient Greek, ‘Tri hodos’, meaning ‘three-way’, to describe the company’s long-term approach to take account of people, planet and profit.

Interestingly, Triodos has deliberately avoided becoming a public listed company in order to retain greater control over its core mission.

Want more?

See detailed company information, ethical ratings and issues for all companies mentioned in this guide, by clicking on a brand name in the score table.  

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