Skip to main content

Ethical Stocks and Shares ISAs

Choosing an ethical Stocks & Shares ISA. Rating the ethical and environmental record of 10 providers, with recommended buys. We look at fossil fuel investments, transparency, market performance, the ISAs on offer, fees, and risks. 

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.

Learn more about us  →

What to buy

What to look for when considering a Stocks & Shares ISA

  • Is it transparent? The more that a company lets you know, the more you can be sure of its ethical credentials. Look at whether it is publishing detailed criteria for its ethical options and lists all of the companies or funds invested in.

  • Is the whole company ethical? Some companies offer one ethical Stocks & Shares ISA but are part of massive conglomerates channelling much of their money into areas like arms and fossil fuels. Use our score table below to help find a company that is ethical through and through.

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

What not to buy

What to avoid when investing in a Stocks & Shares ISA:

  • Is it funding fossil fuels? Check whether the platform or investor excludes fossil fuels. If not, go for a truly transparent option so that you can exclude them yourself.

     

Subscribe to see which companies to avoid and why

Score table

Updated live from our research database

← Swipe left / right to view table contents →
Brand Score(out of 20) Ratings Categories Positive Scores

Our Analysis

What is an ethical Stocks & Shares ISA?

ISAs are ‘individual savings accounts’. Every year, the UK government allows each of us to put up to £20,000 into an ISA without paying income tax on the interest or dividends you may get from it.

A Stocks and Shares ISA is one such type of account, alongside Cash ISAs and Innovative Finance ISAs (IFISA) for which we have separate guides.

Through a Stocks and Shares ISA you essentially help fund companies – both good and bad - and like all investments it is not without financial risk. 

On the positive side, your investment can support everything from renewable energy to more sustainable farming. On the negative side, they may be riddled with all the same issues as other investments or bank accounts. Your money might be going into fossil fuel exploration; it might be linked to cluster munitions or other weapons; or it could be funding animal testing.

There are many approaches that companies can take to creating an ‘ethical’ fund or selecting ethical investments. Some investors will focus on excluding companies which, for example, are involved in problem sectors such as fossil fuels, tobacco or arms. Others may take a more ‘positive approach’ only investing in companies that meet certain criteria, e.g. are supporting climate transition, such as renewable energy companies, or have plans to meet international decarbonisation targets.

Some companies however are not transparent on what approach or criteria they use.

The platforms from which you buy your Stocks and Shares ISA often will not manage the actual funds you invest in. Instead, they will act purely as an intermediary between you as the customer and the investment company itself.

 

How do Stocks and Shares ISAs work?

A Stocks and Shares ISA usually acts as a ‘wrapper’ for your investment. Essentially, it is a low-tax way to invest in a fund or sometimes into stocks and shares directly. This means that you could choose any fund from our ethical investment fund guide or our fossil free fund guide and invest money into it from within a Stocks and Shares ISA.

Some of the funds allow you to do this directly from their own websites. For others you can only invest via an ISA through an 'online investment platform'. Eight of the nine providers in this guide are ‘investment platforms’, which say that they will help you to invest sustainably or ethically through your Stocks and Shares ISA. They will typically have a website or app which will ask you a series of questions about your ‘risk profile’ and ethical values. The more automated of these are sometimes rather futuristically called ‘robo advisors’. The rise of these platforms has made investing much cheaper, without having to rely on traditionally expensive financial advice.

The best funds (highlighted in our ethical investment fund guide) will not be available on all of these platforms. For example, one of our best buy ethical funds WHEB, is only available via two of the platforms we have covered here: Big Exchange and Hargreaves Landsdown. Some of the platforms use other approaches and funds we have not reviewed in our investment fund guides.

The Triodos Stocks and Shares ISA works slightly differently: it offers investments in Triodos’ own funds, which aren’t available via any other platform. We have included it in this guide because it was one of our two best buy ethical funds and you can invest into it directly on the Triodos website.

While most of these platforms work to help smaller investors find the right ‘funds’ (which each contain many companies), it is also possible to buy individual company shares directly on some of these platforms to hold in a Stocks and Shares ISA. If you’re wanting to do this, you’ll need considerable financial expertise, research and/ or advice, so we’re not covering this approach to investing in this guide.

 

Stocks and Shares ISAs vs Innovative Financial ISAs

Both Stocks and Shares and Innovative Financial ISAs (IFISAs) allow you to invest in companies or projects. However, unlike a Stocks and Shares ISA, an IFISA allows you to provide a direct peer-to-peer transfer of money to a company or project, on which you hope to make a financial return, rather than buying stocks or shares floated on the market.

IFISAs are generally more risky than Stocks and Shares or Cash ISAs but will give you much greater control over how ethical each element of your investment is. See our guide to Innovative Financial ISAs for more information.
 

Junior Stocks and Shares ISAs

A parent or guardian can open a Junior Stocks and Shares ISA for their child as a tax-free way to save on their behalf. The money in the account belongs to the child, but they can’t withdraw any of it until they’re 18. The Junior ISA limit is £9,000 for the tax year 2021/22 – meaning that is the maximum amount you can save in this way for that year.

Of our Best Buy companies, The Big Exchange is the only one to offer a Junior Stocks and Shares ISA. Triodos offers a Junior Cash ISA but not a Stocks and Shares option.

 

Person holding tablet device with laptop in background with graph of share prices on screens

Choosing your own ethical Stocks & Shares ISA

In this guide, we have focused on some of the key platforms and investors claiming to be ethical or offer ethical options. However, this list isn’t exhaustive, and as ethical investing markets continue to grow, we suspect more and more companies may begin to claim to offer ethical Stocks and Shares ISA options.

We therefore think there are a few key questions you may want to consider if looking at one of these platforms:

1. What are the investment criteria?
All companies should publish details of the criteria they use to select investments or funds (even if they are a platform rather than holding the investments themselves). Look for companies with either robust exclusion criteria (for example prohibiting fossil fuels or arms companies), or clear parameters for selecting companies for inclusion (for example only those that support the energy transition through renewables).

2. Who is the company’s owner?
We always think it is important to consider where the money is going, by looking at the larger company group that a platform or investor is part of. Unfortunately, it is not always possible to know which holding company will be managing your funds if you invest through a platform, but this might also be something you want to consider.

3. What is its financial performance?
Looking at a Stocks and Shares ISAs’ historical performance may give you an idea of what your returns would be. However, remember that this can change over time.

4. How transparent is it?
Does the company publish its investment criteria? Does it provide a list of the stocks and shares that you own when you invest in its Stocks and Shares ISA?

5. What is it invested in?
An ethical option should show you exactly which funds or shares you are about to invest in. This means that you can sense check them: do they look ethical to you? Some of the platforms also allow you to select your own funds or shares from their options. It’s worth doing a bit of research before choosing but it can be a great way to ensure your ISA meets your definition of ‘ethical’.

How well do ethical Stocks and Shares ISAs perform?

Returns can vary year to year, meaning that your money is always at risk. Many of the companies offer a big variety of different Stocks and Shares ISA options, also making it hard to compare.

The year that coronavirus hit (2019-20) was unsurprisingly a bad one, with investors incurring losses averaging around 13.3%. Yet, between March 2020 and March 2021, Stocks and Shares ISAs performed much better, returning an average of 13.55%.

Although these are likely to be particularly extreme, pandemic-related examples, they show that it is hard to say with certainty what your return on investment might be. Nonetheless, if you look at Stocks and Shares ISAs for the whole period between April 1999 and April 2020, the average annual rate is 5.14%.

Below we provide a breakdown of how each company claims that its ‘ethical ready-made’ ISA options have performed on average over a 5-year period. However, for ISAs that allow you to select your own fund or company to invest in, we recommend that you research the performance of the fund or share specifically.

Triodos – the only Best Buy that has been around for five years – performed well above the average for all Stocks and Shares ISAs (which was 4.95% over five years) at 9.90-16.47%. These figures should always be considered as a snapshot, though, which can vary as markets change. It’s worth doing your own research at the point of investing.

Overall, we suggest you take these figures with a pinch of salt and use the links to look at the specific ISA option you’re considering before making an investment.

Brand

Claimed 5-year average return

Average for all stocks & shares ISAs – UK

4.98%

Triodos

9.90-16.47%

The Big Exchange

n/a – new platform

Clim8 Invest

n/a – new platform

interactive investor

n/a – you select investments: check performance of individual funds offered via website

Hargreaves Lansdown

n/a – you select investments: check performance of individual funds offered via website

CIRCA5000

n/a – new platform (Claimed a benchmark performance of 5%-13% in app, but this is not quite the same as an average return.)

Wealthify

3.98-10.94%(figures from 01/10/2018 - 01/10/2021)

Nutmeg

0.8%-12.3% (figures from 30/09/2018 - 30/11/2021)

BestInvest

8%-unknown (figures for 3-year performance)

All figures were taken from websites on 9th December 2021. Date spans may vary, meaning that comparisons may not be precise. It’s best to check figures at the time you’re planning on investing.

Stocks & Shares ISA providers in this guide

The companies included in this guide are a mixture of small platforms (CIRCA5000, The Big Exchange and Clim8 Invest) and larger platforms and financial institutions.

It’s a rapidly changing market, with several recent entrants, many acquisitions, and one major player, Wealthsimple, announcing in December that it would no longer be trading in the UK.

Wealthify is owned by Aviva. Aviva is one of the strongest companies in the insurance sector when it comes to investment transparency but has been criticised for investments in companies which have links to nuclear weapons or supplying the Israeli military and government.

Hargreaves Lansdown is owned by UK billionaire Peter Hargreaves. Peter Hargreaves was the biggest individual donor to the Brexit campaign, donating £3.2 million which helped to pay for campaign promo materials to be sent to one in three homes in the UK. He has since said that he doesn’t regret his donation “one bit”, despite losing £400 million in the share price meltdown that followed the announcement of the UK’s departure from the EU.

The company is also facing a class action from 2,000 investors over the Woodford fund debacle. In 2019, a fund managed by Neil Woodford collapsed, with many small investors still waiting for their money to be returned. According to the Financial Times: "Hargreaves Lansdown is being targeted as it continued to recommend the Woodford Equity Income fund in its best buy list right up to the day of its collapse, despite awareness of the portfolio’s liquidity issues."

interactive investor (ii) is currently owned by private equity firm J.C Flowers & Co, but is soon to be bought by Abrdn for £1.5 billion. Abrdn is also an investment and asset management company and was formerly known as Standard Life Aberdeen until what The Guardian describes as “a vowel-averse name change” earlier in 2021. The buyout should see ii’s score increase from 4.5 to 7.

Bestinvest is owned by Tilney Smith & Williamson. We know that Tilney Smith & Williamson is part owned by private equity company Warburg Pincus and investment firm Permira. Because Permira (which also owns other brands like Dr Marten's shoes) is named as the 'main shareholder', Tilney picks up scores from other parts of the Permira portfolio.

Nutmeg is owned by JP Morgan Chase, which has been the world’s largest financier of fossil fuels every year since the Paris Agreement. JP Morgan Chase’s financing has been linked to everything from cluster munitions to land grabs and fires in the Amazon. The company came close to a boycott call after it was found to be the financier of the deeply unpopular Super League for European Football.

The financial giant has also been criticised by Global Justice Now for making enormous profits from debts owed by countries in the global south. Global Justice Now says:

“The amount that African governments owe to companies like BlackRock, HSBC and JP Morgan could vaccinate the entire population three times over. Global South governments also argue that debt is preventing them from investing in green technology and a just climate transition.”

In 2020, Zambia became the first African nation to announce during the pandemic that it could not make the debt repayments that big banks are refusing to delay or renegotiate. If paid back in full, big banks including JBP Morgan could make up to 250% profit on the debt.

Take Action

Our Brand to Avoid, Nutmeg, is owned by JP Morgan Chase, criticised for profiting from debts that are holding back countries in the Global South.

Sign the Global Justice Now petition calling on Rishi Sunak and Liz Truss to support debt cancellation for Zambia now.

Specialist ethical investors

The Big Exchange rates investments based on how much they contribute to the UN Sustainable Development Goals.

Funds are considered ‘Impact Leaders’, ‘High Positive Impact’ or ‘Positive Impact’ based on the proportion of the fund that is invested in companies making a positive contribution to the SDGs, and whether it has proper environmental, social and governance management systems in place. Funds are assessed by 3D Investing, which Ethical Consumer has worked with in the past for information on fossil-free funds.

You can choose a suggested bundle from Big Exchange or create your own bundle by looking at and selecting different funds.

The Big Exchange does not appear to exclude funds providing financing for any sectors, including fossil fuels. However, it provides a narrative report on each fund offered, which includes ‘Potential issues you may want to know’. This flags areas including fossil fuels, animal testing and nuclear power, as well as “the response from the fund manager”. This allows you to avoid them yourself.

Big Exchange also provides information on areas such as transparency and positive influence i.e. is the fund engaging with companies in which they hold shares to encourage more ethical practices? For some funds it gives a full list of companies that are invested in via the fund, except in instances where it said ‘No holdings found.’

Triodos is a direct investor, rather than a platform. Its Stocks and Shares ISA allows you to invest in one of its three impact-investment funds: Triodos Global Equities Impact Fund, Triodos Pioneer Impact Fund, and the Triodos Sterling Bond Impact Fund.

It publishes clear and detailed exclusion criteria on its website, for example covering tobacco, weapons, conflict minerals and animal testing. Triodos excludes all companies that “produce or retail energy from fossil fuel (coal, oil, and gas) power plants;” as well as those that retail petrol or have built or operated coal-fired power plants constructed after 2009.

It also published a full list of companies in each of the funds on its fund product pages, under the heading ‘Who we invest in’, which it updates quarterly.

Clim8 Invest is an investment platform focused on offering what it describes as “a targeted portfolio of publicly listed companies that are already making an impact in tackling climate change.” It states “We only invest in companies that have a product or service that is having a positive impact on the environment."

It focuses on six key sectors: clean energy, water systems, clean technology, sustainable food, smart mobility and recycling.

The company conducts environmental screenings on companies before investing, looking at carbon and waste and water. It then selects the following:

  • Direct stocks: "Companies trending towards the Paris temperature goals or below, avoiding sector laggards. Companies making the best use of their resources and show positive developments on carbon emissions relative to their sector & region."
  • Equity funds: "Engage with fund managers to understand their investment process towards shifting portfolios towards Paris goals. Sharing our common learnings to create a positive feedback loop."
  • Fixed income funds: "As above. Sovereign, corporate and green bonds each require a specific assessment of their alignment with Paris benchmarks."

It stated that it excluded companies involved in fossil fuel extraction, tobacco, gambling and weapons, and Big Tech. With regards to fossil fuel processing it explained: “we look where these fossil fuels are processed":

  • "Refining: to be included, the share of biofuels need to exceed 30% (and results in a de facto exclusion)
  • Petrochemicals/chemicals: same logics apply on biochemicals (and results in a de facto exclusion)
  • Power: the IEA has set guidelines to assess if the power sector is decarbonising in line with a net-zero scenario. Indeed, intensity pathways have been set (in g of CO2 per kWh of electricity generated) to 2030 and 2050. We assess companies in the power sector using these numbers and every company that is unlikely to meet the 2030 targets is excluded. Companies that have no plan to divest coal generation by 2030 are also excluded …"

“We have a policy that is compatible with 1.5°C by phasing out coal-power generation by 2030. Natural gas will still be required by then. The power generation mix of our equity portfolio is as follows: wind+solar 26%, hydro 3%, nuclear 26%, natural gas 41%, coal 3%, oil and other 1%.” It therefore currently includes funds and companies involved in fossil fuel generation, including coal.”

When asked about its specific methodology, the company told Ethical Consumer that it used its own tools to review the “thematic exposure” of the fund or stock; and that it used the independent consultancy Carbon4Finance “for measuring the CO2 impact of companies in the portfolios of selected funds, along with temperature alignment” of equity funds and direct stocks.

The company publishes monthly fact sheets for its funds on its website, which list all holdings and the top 20 shareholders from these.

CIRCA5000 is an app-based investment platform that says it allows you to "Invest in businesses enriching the planet, its people and most of all, you."

The app allows you to select your issue between ‘People’ and ‘Planet’ or ‘Both’. Within these categories, you can select more specific areas for investment, such as 'Sustainable future of food', 'Clean water', 'Pharma breakthrough', ‘Government Bonds’ or ‘Green Bonds’. Where applicable, these areas are further broken down into the top 10 shares held under the theme.

CIRCA5000 provided us with information on how it screened the funds offered, although this information did not appear to be publicly available.

For its ‘Planet’ theme, it stated that it used a combination of screening for alignment with themes (including excluding weapons companies and extractive businesses, although it was unclear what this meant); relying on partner funds’ screening criteria; and looking at “a company’s carbon emissions relative to their revenue to identify any high emission businesses that have slipped through the net, which are then excluded.” With regards to fossil fuel exclusion, the company stated that it excluded “all of the major fossil fuel extraction companies (e.g. BP)”, but did not exclude those which “have started out as fossil fuel companies but have made significant progress to becoming carbon neutral.”

In terms of the company’s ‘People’ theme, it stated that it had three key focuses: health, education and cyber security. For education and cyber security, it stated that it excluded aerospace & defence and weaponry sectors. For health, the company stated it focused on ‘breakthrough pharma’, to ensure that the investments did not enable “Big Pharma to make vast profits at the expense of people in need of lifesaving treatments.”

The app displays the top ten holdings within each ETF.

Mainstream investors with some ethical options

Bestinvest is an investment platform, which advertises some ethical options. It suggests that you can: choose an ethical fund “including those rated by our research team”; choose your own ethical shares to invest in; or select its ready-made ethical portfolio – a collection of investments already bundled by the company.

It was unclear how the company rated ethical funds, although it suggested in its ethical investment booklet that it may use ‘The Green Scale’:

  • Dark green – The strictest form of ethical criteria. Typically the fund manager is unable to invest in a substantial part of the market, particularly alcohol, defence, gambling, mining, oil and gas, and tobacco.
  • Mid green – As the name suggests, these funds are in the middle when it comes to strictness of ethical criteria. They focus on most of the issues considered by ‘dark green’ funds, but they may include some exposure to utilities, banks and pharmaceuticals.
  • Light green – The least strict of the ethical criteria. Light green funds tend to focus on best-in-class ESG and can invest in sectors that ethical investors may be uncomfortable with. They are typically more closely aligned to mainstream funds and indices.

Clearly, there would be much variation in the ethical robustness of funds from light to dark green.

In terms of its ethical portfolio, the company says: “The majority of the funds in the portfolio are from our list of top-rated ethical and sustainable funds – they invest in a variety of businesses that aim to have a positive effect on the world and avoid those that have a detrimental impact on society or the environment.”

That only “the majority” of funds are said to be ethical might ring alarm bells for some investors! The company seemed to provide very little information about what this meant in terms of investment criteria or shares held at the point of investment, only breaking prospective investments down into % type, e.g. 46% equity, 10% property.

interactive investor (ii) is a DIY investment platform – meaning it provides tools for the user to make investments in funds directly. It provides short and long-lists of what they consider to be ethical fund options, categorising funds into the following ‘ethical styles’:

  • Avoids – Funds that focus on excluding companies, sectors or specific business practices in line with the published fund criteria that may focus on ethical, social and/or environmental issues.
  • Considers – Funds that actively consider ethical and/or environmental, social and governance (ESG) issues as part of their investment strategies.
  • Embraces – Funds that focus on companies or other investment types (e.g. infrastructure, property) where delivering positive social and/or environmental outcomes is integral to their existence.

ii says that its recommendations are compiled in association with SRI Services, an independent consultancy, and that “SRI Services don’t just look at what the management groups say at face value – they look at the literature, and if they see little evidence of real differentiation, they won’t classify it as ethical.”

However, it doesn’t appear to have a very high bar for inclusion. For example, when we asked whether funds were expected to exclude fossil fuels it stated: “Ethical investing is subjective and so we allow our customers to exercise their own judgements … limited exclusions would be the lowest classification – which would mean they don’t avoid very much, but there is a strategy that shouldn’t be confused with greenwashing.”

Even those in the Avoids category therefore aren’t required to exclude fossil fuels.

Using these criteria, ii offers three different ethical investment packages (for which you pay a monthly fee):

  1.  ii ACE 40 – said to be the 30 best-in-class funds, trusts and ETFs.
  2.  Ethical investments long list – a list of 140 options ii considers to be ethical.
  3.  Ready-made ethical portfolio.

Information is given about each of the funds included in these packages, including: the name, the ethical style and the rationale for inclusion. However, no further meaningful information on their ethics is provided: for example, for funds considered to be of the ‘Avoids’ type, it remains unclear what sectors they actually avoid.

The company stated that it provided a factsheet for funds, which included top 10 holdings, but a full breakdown of shares within the funds, or a link to where this information could be found, was not available.

One plus side of ii is that they let customers know about upcoming votes at companies in which they are invested so they can make their voices heard. They told us: “we have been running a campaign all year educating our customers and the wider general public about the power of their collective voice when it comes to voting and AGMs. We have a useful voting and information page with interactive videos and content about how to make your voice heard ... We are fully transparent on voting trends and regularly publish information on the most voted shares on our platform, explain how investors can vote and attend AGMs, and publish information on key upcoming votes.”

Hargreaves Lansdown (HL) is an investment platform, meaning that you select your own investments using its tools. The Wealth Shortlist – one of its ‘wrappers’ from which you can select your particular funds – includes what HL labels as ethical options.

Like Interactive Investor, HL provides some information about why it considers the fund to be ethical and what type of approach each fund takes, for example, saying of one fund option: “The manager doesn’t invest in areas deemed unethical, such as tobacco and fossil fuels.” At the time of writing, there were only five ethical fund options listed.

When asked about fossil fuel exclusions, the company stated: “No funds which invest in coal companies would fall into responsible investing. Some funds might have fossil fuel exposure, for example oil companies who are investing in greener energies.”

You can view the top 10 companies invested in by the fund. The ‘ethical’ funds listed were invested in companies like Nestlé and AstraZeneca.

We asked the company whether a full list of shares was made available, and it stated: “There are almost no funds which publish more than their top ten holdings on a regular basis ... There are probably fewer than 10 funds out of 3,000 which publish full holdings details regularly.”

Wealthify is an investment platform that creates a suggested investment plan based on how long you wish to invest for. It offers an ethical option, which only includes funds managed by providers that have signed up to the Principles of Responsible Investment, as well as Exchange Traded Funds (which often have weaker screening processes).

Wealthify states: “The ethical funds we use will directly exclude things like tobacco, weapons, adult entertainment, gambling, nuclear power, and unfair labour practises. More importantly, funds will have different tolerance thresholds with some completely excluding companies that profit from harmful activities while others are willing to invest in such organisations if less than 10% of their overall profits derive from these kinds of activities. Although our fund providers have different tolerance levels, our aim is always to be as close to 0% as possible.”

However, it did not provide sufficient information to judge the robustness of its screening criteria: for example, what are considered ‘harmful activities’.

It did not mention fossil fuel exclusion anywhere on its website.

It provides names of the funds that you will be invested in, but not the particular companies in which that fund holds shares.

Nutmeg is an investment platform that suggests a portfolio based on your risk level and investment style, including an ethical investment portfolio option. All investments are in Exchange Traded Funds (ETFs), which often have weaker ethical screening criteria than managed funds.

The company says that it uses a “range of different strategies” to select ethical investments, but does not say what these are. It provides investors with a rating for the portfolio overall and against each of the following three criteria:

  1. Environmental: water stress and carbon intensity.
  2. Social: labour management and privacy and data security.
  3. Governance: % women on board of directors and business ethics and fraud.

However, it’s unclear what exact criteria it uses for the ratings, with the exception of % of women on board of directors.

The company says that as a minimum it excludes companies with significant exposure to the tobacco industry, either as a producer or distributor; involved in the production of nuclear weapons; or involved in the production of controversial weapons such as landmines, cluster bombs or chemical and biological weapons.

It stated that some funds also excluded fossil fuels, however, not all were expected to do so. For example, funds on some ‘ethical’ lists were permitted to include companies that made up to 5% of revenue from coal – one of the worst fossil fuels – and were not required to exclude the top emitters by carbon intensity.

Nutmeg publishes the lists of ETFs each portfolio invests in, but not the shares that these ETFs hold. These are often available on the index’s own websites though.

OneFamily offers two Stocks and Shares ISA packages, both of which are said to be ‘climate-friendly’ and are sub-funds of one of its own investment funds (Family Investments Global ICVC). It provides a % of the fund that is in ‘climate-friendly company shares’, which was 100% for one fund, but just 35% for the other at the time of writing. This percentage figure is said to be based on five criteria:

  1. What percentage of the company’s overall revenue comes from “green” business activities, such as low-carbon technology and “clean” energy production?
  2. How well are companies adapting? Looking, for example, at their greenhouse gas emissions targets and plans?
  3. How much carbon emission the company is responsible for, including in its supply chains?
  4. How much greenhouse gas emissions result from the company’s fossil fuel reserves?
  5. What proportion of the money the company makes is made through “brown” sectors like drilling, mining and other extractive activities?

The company gave further information via email, stating that it started with the MSCI World Index and used “a combination of climate exclusions alongside a “tilting” mechanism when selecting stocks to invest in”, which excludes around 2/3 of companies on the Index list. The company shared its ‘tilting’ approach: it stated that, in each sector, companies were scored and selected based on considerations like green revenues (the higher the better) and carbon intensity (the lower the better).

The company automatically excludes companies making cluster bombs, landmines and chemical, biological or nuclear weapons; or gaining more than 10% of income from oil sands or thermal coil. However, it does not exclude all fossil fuels.

It has published a list of investments in its various fund reports. For Family Investments Global ICVC (the fund from which its Stocks and Shares ISAs investments were selected), these included BAE Systems, Royal Dutch Shell, and BP.

On its website, it also outlined the following targets for its ISA and lifetime ISA investments:

  1. To make the carbon intensity of companies in the fund 70% lower than the average score of the 1600+ companies assessed;
  2. To make the fuels/brown revenues of the companies in the fund 90% lower than the average score of the 1600+ companies assessed;
  3. To make the green revenues score of the companies in its fund 300% higher than the average score of the 1,600+ companies assessed.

What should an ethical Stocks and Shares ISA look like?

There are some fundamentals that we would expect to see for all ‘ethical’ Stocks and Shares ISAs, whether offered by a platform or a manager:

1. Is the whole company ethically focused? This guide features both those companies that are claiming to only offer ethical options, and those that offer one or two ethical options amongst many that are not.

2. Does the ISA clearly exclude fossil fuels? This should cover fossil fuel extraction and generation. If not, does it easily enable you to do so yourself?

3. Is the company transparent about its criteria and methodology? We expect companies to publish information about how they select the shares or funds on offer for investment so that consumers can judge for themselves whether they meet their ethical priorities.

4. Are they transparent about your investments? We expect ethical investment providers to provide a full list of all the companies that you will invest in. Ideally, this would be provided before the point of investment so that you are able, as a customer, to screen for companies or funds you’re not happy with. As you can see in the table below, many only publish their top 10 holdings.

Ethical issues with ISA providers

We looked at how the companies performed against the above criteria when it came to the Stocks and Shares ISAs that they were claiming to be ethical. Only two companies fulfilled more than three out of the four criteria.

As well as looking at the companies behind the brands, we have checked the quality and transparency of the advice that these platforms are giving to prospective ethical investors. In particular, we have checked whether they are clearly helping people to avoid fossil fuel investments.

What should companies be doing on fossil fuels?

Ideally, companies should be excluding fossil fuels across their entire investment portfolio, as Triodos does.

Failing that, they should be excluding them from their ethical products. However, with just one company found to take this approach, platforms which enable consumers to easily exclude fossil fuels themselves are also taking a step in the right direction e.g. The Big Exchange.

We think that really all companies claiming to offer an ‘ethical’ ISA should at least be asking this question of customers when helping to select the right investments for them. If a consumer opts to exclude fossil fuels, the platform should automate the exclusion process for them.

  1. Is the whole company ethically focused? 2. Does the ISA clearly exclude fossil fuels? 3. Is the company transparent about its criteria and methodology? 4. Is it transparent about your investments prior to purchase?
Triodos Yes Yes Yes Yes
The Big Exchange Yes No Yes Yes
Clim8 Invest Yes Yes Yes Yes - all holdings and top 20 shares
CIRCA5000 Yes No Yes No – top 10 holdings only; and provides funds to investors
interactive investor No No Yes No – funds and top 10 holdings only
Hargreaves Lansdown No No Yes No – funds and top 10 holdings only
OneFamily No No Yes No – top 10 holdings only for the ISA; plus full list for the overall fund, of which the ISA is a sub-fund
Wealthify No No Insufficient No – funds but not shares
Nutmeg No No Insufficient No – funds but not shares
Bestinvest No No No Unclear

Exclusion, inclusion and transparency with Stocks and Shares ISAs

There are two meaningful approaches to ethics in this sector.

The most straightforward approach is for companies to demonstrate truly robust exclusion and inclusion criteria.

In our view, these should always exclude fossil fuels and other problem sectors such as arms, as well as supporting companies involved, for example, in climate transition. Taking this approach ensures that money is being moved away from problem sectors to more positive ones every time a customer invests. Triodos is a brilliant example of this.

Alternatively, a company can have fewer exclusion criteria – for example, allowing fossil fuels – but demonstrate exemplary transparency, enabling customers to make their own decisions.

The argument for this approach is that some multinationals remain involved in problem sectors but are genuinely in the process of transitioning away from them: for example, many of the largest green energy generators also have some remaining fossil fuel involvement. In these cases, a company should be engaging with investors or the companies themselves to understand the transition process and ensure this is being followed. The Big Exchange is a great example of this approach.

We were told by one company in this guide:

“There are almost no funds which publish more than their top ten holdings on a regular basis ... There are probably fewer than 10 funds out of 3,000 which publish full holdings detail regularly.”

This makes it all the more worth supporting the companies that do: Triodos and The Big Exchange.

Top down view of a table with person with laptop pointing at form and two people holding hands on other side of the table

What does all the jargon mean?

Stocks and shares are essentially a way to invest in individual companies, which means that you can own a tiny portion of each company.

Investment funds are collections of stocks and shares of different companies pooled together. You can invest in a fund, meaning that you own a portion of those stocks and shares alongside multiple other investors. Funds are used to share the risks involved in investing with others and across a number of companies so you are less exposed to a single company’s performance.

Managed funds are actively controlled, screened and assessed by a real human fund manager, meaning that they check and change the stocks and shares included in the fund based on specific criteria such as performance and ethics.

Investment platforms are companies that allow you to invest in funds or shares via their app or website, but do not hold these funds or shares themselves. They essentially provide tools for investing.

Wrapper is the phrase often used when an investment platform pulls together a number of investment options – either funds or shares – under a specific heading such as an ‘ISA wrapper’.

Exchange Traded Fund (ETF) is a type of investment fund traded on the stock exchange. Rather than being actively managed, most ETFs track the performance of a stock or bond index (such as the FTSE100 or Dow Jones Sustainability Index often investing in all the shares in an index).

Ethical ETFs may be less ethical options than managed funds as the criteria they use for inclusion can be quite broad. ETFs are cheaper to run but have not always convinced everyone on the quality of the ethical screening.

Robo advisors are apps or websites that provide automated financial planning without human supervision. They use their algorithms to calculate your risk level and (sometimes) ethical values and present you with a set of ready-made investments based on your profile. Many established investment platforms and fintech startups offer robo advisor services.

How long is your money locked in for?

Generally speaking, Stocks and Shares ISAs are flexible and allow you to withdraw your money when you need to, by selling your stocks and shares. The downside is that because your money is linked to the value of companies or funds, rather than sitting in a bank, you may end up with less than you started with or had the potential to ‘earn’ if you withdraw at the wrong time. Because of this volatility, most advice suggests that saving with stocks and shares only really makes sense if you’re planning to save for the long term – perhaps five years or more.

It will also take a little more time to withdraw from a Stocks and Shares ISA compared to a Cash ISA. Usually, it takes around 3-7 working days before the stocks and shares can be sold and the money will arrive in your account.

What are the risks with Stocks and Shares ISAs?

ISAs are protected by the Financial Services Compensation Scheme up to £50,000 – but only if your fund manager goes bust, not if your investments take a nose-dive. If your stocks and shares perform badly therefore, you won’t be compensated for your losses.

A common rule of thumb, therefore, is not to invest more than you can afford to lose. If the sums you want to invest are large, you may want to seek advice before investing.

Person at desk with bank statements, calculator and computer

Are there minimum initial investment levels for Stocks and Shares ISAs?

Lots of Stocks and Shares ISAs require you to invest a minimum initial amount. This is sometimes quite high, excluding those with less savings, but more and more companies are offering an accessible minimum deposit amount

Brand Minimum initial investment
Triodos £1,000
The Big Exchange £25 with monthly top ups; £100 for one off investment
Clim8 Invest £25
interactive investor £25 a month
Hargreaves Lansdown £100
CIRCA5000 £5
Wealthify No minimum
Nutmeg £100 for Lifetime ISA £500 for General ISA
Bestinvest Unclear

Fees involved with Stocks and Shares ISAs

While a Stocks and Shares ISA is tax-free, that doesn’t mean it's entirely without cost. You usually have to pay a few fees, including any of:

  1. Platform charge, which goes to the platform through which you invest. Can either be a flat fee (best for those investing large amounts) or a percentage of the value of your funds.
  2. Fund manager charge, also known as annual management charge, which goes to the company actually managing the fund held within your ISA. Always a percentage of the amount you hold in the fund, up to 1%.
  3. Selling and buying funds and shares. There is a cost every time you decide to trade your funds or shares, ranging from £0-25. Many people will just pick a fund and stay invested, in which case this fee won’t be much of an issue. But it will be more of a concern if you plan to be an active trader – i.e. to try and increase your returns by buying and selling shares and funds.
  4. Transfer-out fee is the amount you will pay if you decide to move your Stocks and Shares ISA from one platform to another, usually charged per fund. However, with most Stocks and Shares ISAs you will have the option to sell your investments and receive a lump sum for free (although you may pay for selling the shares as outlined above). 

Getting independent financial advice

When making complex decisions around investing, seeking professional advice is almost universally recommended particularly if you are looking to invest larger amounts.

Finding someone who will respect your ethical principles and take them seriously is easier than it used to be.

Independent Financial Advisors (IFAs) tend to operate as small businesses, partnerships or sole traders and there are more than 5,000 in the UK. IFAs used to focus on a specific region, but nowadays many will advise nationally.

We have a guide to finding an IFA that aligns with your principles.

Companies behind the brand

The Big Exchange was co-founded, and remains 37.5% owned by, The Big Issue Group.

The Big Issue Group is a ‘social investment business’, producing a magazine of the same name offering employment opportunities to people in poverty. The Big Issue enables individuals to become ‘micro-entrepreneurs’, buying the magazine for £1.50 and selling it on for £3, often as a route out of homelessness. Its Foundation is a registered charity, working with vendors on areas such as employment, training, education and learning, health care, housing, and personal development.

It also provides loans and investments for social enterprises, charities and profit-with- purpose businesses, calling itself “the UK’s first ‘Social Merchant Bank’ .... Big Issue Invest currently manages or advises on £150 million of social funds.”

Want more information?

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.  

This information is reserved for subscribers only. Don't miss out, become a subscriber today.