How to invest ethically

Ethical investing involves channelling your savings into investments that are better for people and the planet. This can range from making sure you’re not funding arms to putting money into greener options like wind farms or other renewables.

Many of us already hold investments – whether we realise it or not. Our pensions are a form of ethical investment, as are any investment funds or ISAs that we own.

How do I invest ethically?

We outline some steps you can take when thinking about investing ethically.

Step 1. Decide what type of ethical investment you’d like to make

There are lots of different types of investments out there, including:

Ethical Savings Accounts: Savings accounts are essentially a form of investment, insofar as they allow your bank to put your money into investments, and provide you some of the interest on this.

Ethical ISAs: Also known as ‘individual savings accounts’, ISAs are a form of tax-free investment fund. Every year, the UK government allows you to put up to £20,000 into an ISA without paying income tax on the interest or dividends you may get from it (reduced to £12,000 for cash ISAs from April 2027). There are three different types of ISAs: 

• Cash ISAs
• Stocks and Shares ISA 
• Innovative Financial ISAs

Ethical Investments Funds: Investment funds essentially act as ready made packages grouping together investments in multiple different companies. Investing in this way is less high-risk than choosing stocks and shares yourself (although it certainly isn’t risk free), because your chances are spread across multiple companies. Different investment funds will have different priorities, but watch out for funds that are labelled as ‘sustainable’ without having strong ethical criteria. We explain more below.

Ethical Pension Funds: Most people save money in a pension fund for decades before they retire. During this time, the money is invested, so you receive interest on your savings and your pension pot grows. Find out more in our guide to pensions.

Ethical Investment Platforms: Direct ethical investments allow you to select the individuals companies and organisations you’d like to invest in. This form of investment is much higher risk, but can be a way to maximise impact, for example by directly funding a solar project or affordable housing.

If you are new to investing, an ethical ISA can be a great place to start. For more experienced investors and those prepared to take higher risk, direct ethical investments allow you to take a very active part in ensuring your money goes to better organisations.

For nearly all of the investment options outlined above, your bank or financial manager will decide on your behalf what you will invest in: you don’t get to specify what your money is used for. If you are concerned about how banks or other organisations invest your money, you need to look at their overall ethical policies.

Step 2: Think about your ethical criteria

Each of us will have different priorities when it comes to ethical issues. When looking for an ethical investment, it will be important to decide what you want to focus on. This may include any or all of the following issues:

Environmental: Lots of banks and investment companies channel huge amounts of money into fossil fuels and other climate-wrecking sectors. The most ethical options will instead fund the green infrastructure we need for a sustainable future, like greener farming, renewable energy or sustainable housing projects.

Focus on environmental criteria if you care about issues like: climate change, carbon footprint, pollution, and the use of renewable resources.

Social: Many of the world’s biggest companies have been linked to major human rights abuses, from child labour to sale of arms. Look for an investment option with strong social criteria to avoid funding these kinds of companies.

Focus on social issues if you care about issues like: workers’ rights, the sale of arms, indigenous rights, and displacement of communities.

Animals: Banks and investment firms support factory farming and animal testing through the companies they finance. The most ethical options will have strong policies to ensure animal welfare and animal rights.

Focus on animal criteria if we care about issues like: animal rights, animal welfare, factory farming, animal testing, or fur.

Governance: Financial companies are notorious for tax avoidance and excessive directors pay, as well as financing many companies implicated in the same problems. By looking for a company that has strong policies on its own governance, as well as clear governance criteria for the firms it funds, you can help tackle these issues.

Focus on governance policies and criteria if you care about issues like: executive pay, board diversity, and tax conduct. 

Step 3. Choose an investment approach 

Financial companies take lots of different approaches to ethical investments - some more robust than others.

Exclusions: Lots of companies avoid investing in certain industries such as tobacco, weapons, fossil fuels, or gambling. Lots of mainstream banks will have some exclusion criteria - for example they might exclude companies making all of their money from coal. However, these often aren’t very robust and should be taken with a pinch of salt.

Positive Impact: The most ethical financial companies will focus on making a positive impact as well as excluding the worst options. By financing sectors like renewable energy and sustainable farming, they ensure these necessary industries can grow.

Stewardship: If you already have investments that you can’t or don’t want to move, you could consider becoming an ‘activist investor’. That means using your share to try and push for more ethical practices - for example by putting forward resolutions or voting at annual general meetings. Campaign group ShareAction puts this approach into practice to great effect: get in touch with them for advice.

Best-in-Class: Lots of ‘ethical’ investment funds will put money into multinationals that have the highest ratings for their environmental and social governance, even if they are in a sector that isn’t traditionally ‘sustainable’. Proponents of this approach argue that it can help persuade the biggest corporations in the world to improve their ethics. But we would argue that the criteria used to rate these companies are often shaky, meaning that your money might end up funding some pretty dodgy practices.

The most ethical investment firms will usually take a mixture of approaches - pairing strong exclusion criteria with positive impact investments.

Step 4: Choose an ethical investment provider

Lots of the largest investment companies now claim to offer ethical investment options, but many of these funds only have weak ethical criteria. The company as a whole may also still be funding the worst industries from fossil fuels to nuclear weapons through their other investment funds.

For a truly ethical investment, look for a company that prioritises social and environmental issues across the board. This means that they:

• Have clear, strong and publicly available criteria outlining the sectors that they will not finance. 
• Take a positive investment approach, actively looking for companies and sectors that are paving the way for a more sustainable future. 
• Transparently publish their investments, allowing you to check exactly what your money would be going towards.

Our independent guides rate and rank dozens of investment options, including listing our Best Buy recommendations. Check out our guides to: 

• Ethical Investment Funds
• Ethical Savings Accounts
• Cash ISAs
• Stocks and Shares ISAs
• Innovative Finance ISAs
• Ethical Pension Funds

If you’re struggling to decide exactly where to invest, you could look at hiring an independent financial adviser to help with the decision. It’s worth looking for someone who specialises in ethics, though, as more traditional advisors may not understand quite what you are after.  

FAQ - How to invest ethically

Below we list some frequently asked questions about how to invest ethically to help you find out more.

• Can you explain what ethical investing really means?
• I'm a new investor and want my money to do good. What should I be thinking about first?
• What are the risks of ethical investing?
• Is ethical investing actually profitable?
• Which UK platforms offer ethical investing?
• How do I find out if my current investments are ethical?
• How can I make sure my investments align with my values on climate change?
• Can I trust sustainability claims on ethical investment funds?
• How do I check if an investment company is truly ethical or just greenwashing?
• My main ethical concern is human rights. How do I find funds that avoid companies with poor labour practices?
• What's the difference between an ESG fund and a sustainable fund?
• Is it better to divest from unethical industries or engage with them as a shareholder?

Can you explain what ethical investing really means?

Most people in the UK hold some form of investment, whether through your pension, savings account, or an ethical investment fund. Ethical investing means moving money to funds or companies that are more sustainable and fairer for people, animals and the planet.

Lots of companies will have some ethical criteria, particularly for funds advertised as ‘green’ or ‘eco’. But the best companies will also be actively supporting a greener future, for example through funding renewable energy or more sustainable farming. 

I'm a new investor and want my money to do good. What should I be thinking about first?

Whether looking at ethical or traditional investments, the first thing to think about is what kind of investment makes sense for you.

If you want to make an investment of less than £20,000 a year (or £12,000 from April 2027 when the allowance will change), a cash ISA is often a good option. It is a tax-free saving, and is protected under the Financial Services Compensation Scheme, which means that your investment should be protected if the company you invested through fails.

Lots of cash ISAs also allow you to withdraw your money whenever you want (although some have a limit of how often you can do this in a year), which is great if you don’t know how long you’re likely to save for.

Once you’ve decided on the type of investment that is right for you, you can start looking for an ethical company. Ethical Consumer rates and ranks companies based on their ethical investment policies, and lists Best Buy recommendations in all our guides.

Alternatively, if you want to do the research yourself, look at a variety of companies’ ethical investment policies. These should outline the sectors that they refuse to invest in (such as fossil fuels or arms), as well as how they try to support more sustainable business.

Ethical companies should also publish information on the companies and organisations they currently finance, so that you can take a look at where your money might go. 

What are the risks of ethical investing?

There is always a risk involved in investing, but the level differs greatly depending on the type of investment you choose.

For some forms of investment, the amount in your account will never go down without you withdrawing (although if its growth is outstripped by inflation it might be lower in real spending terms). This is true of savings accounts and cash ISAs, for example.

Many forms of investment in the UK, including all pensions, savings accounts, and cash ISAs, are also protected under the Financial Services Compensation Scheme (FSCS), which means that up to £120,000 will be paid back to you if the financial company you invested through should fail.

Many investment funds are also protected by the FSCS. However, the protection only applies if the bank or investment company itself fails; it does not apply if the companies you’re invested in collapse or the value of your investments goes down. For this reason, you can still lose money.

Most funds will have a risk number, usually the higher the number the greater the risk. More risky funds will usually invest more heavily in equities (company shares), which can go up or down in value. Less risky funds will put more into assets with a fixed rate of return, such as bonds.

Is ethical investing actually profitable?

Ethical funds have performed solidly over recent years - often offering better returns than their traditional peers (although all investments come with some risk).

Finance firm Morgan Stanley published research in 2024, which found that sustainable funds had consistently outperformed their traditional equivalents in all but one year between 2019 and 2023. In 2023, sustainable funds outperformed traditional equivalents across all major asset classes and regions, the research showed.

“Sustainable funds generated median returns of 12.6%, almost 50% ahead of the 8.6% returns of traditional funds”, Morgan Stanley said. 

Which UK platforms offer ethical investing?

Many mainstream finance companies now offer what they call sustainable or ethical investment options, including firms like AXA, Legal & General and Scottish Widows. However, the ethical requirements of these specialist funds vary greatly, with many having only limited ethical criteria, or still investing in the most harmful sectors through their other investments.

Instead, companies offering really ethical options include banks like Triodos – one of our Best Buy companies, with strong policies on issues from arms to fossil fuels – and Ecology Building Society – which largely invests in greener homes.

Check out our various finance guides including Ethical Investment Funds, Ethical Savings Accounts, Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs, and Ethical Pension Funds to find more options.

How do I find out if my current investments are ethical?

There are a few great ways to check whether your current investments are ethical.

Firstly, the most ethical companies will provide details of all the corporations they are invested in, either as a whole or for your particular fund. If available, you can find this information on their website or to download in each fund’s information sheet.

You may want to start by checking this information to see whether your current investments align with your principles. The most ethical investment firms will not only be avoiding harmful sectors like fossil fuels and arms, but also investing in greener and more positive industries, such as renewable energy and affordable housing.

A great second step is to check a company’s ethical investment policies, where these have been published. Strong policies can ensure that even if the exact investments change they will still reflect your values. The best policies cover everything from fossil fuels to animal testing.

If you're struggling to unpack all this information, Ethical Consumer’s guides are a great tool to help check the ethics of your current investments. We rank companies based on their policies and investments. Our ratings include detailed explanations of everything from the strength of their policies on coal, oil and gas to whether they are funding companies linked to Israel’s attacks on Palestine.

How can I make sure my investments align with my values on climate change?

Lots of funds claim to be ‘sustainable’ or ‘green’ without making truly meaningful steps to address climate change. There are a few good steps to take to make sure your investments align with your environmental values.

Firstly, if you’re in the UK and have invested via a specific fund, check whether it has a government-approved sustainability label. Since 2024, UK regulators have introduced labels for funds that take a more robust approach to sustainability, so checking for this can be a great first step for ensuring your investment is at least somewhat aligned with your values on climate change. 

Unfortunately, though, the labels are far from water-tight, so it’s worth also looking at a company’s investments and policies directly. You can also check these if your investments take another form, such as a savings account, pension or ISA.  

Ethical companies often list all the corporations they are invested in. You will likely want to check this information for fossil fuel companies like Exxon and Shell, but also for other climate-harming corporations like JBS, the world’s biggest meat company, or palm oil trader Wilmar.

Look out for more positive investments too, for example in renewable energy or sustainable housing. The most ethical options will be paving the way for a greener future through their financing.

Alternatively, if this feels too complicated, you could choose to invest through a building society. These largely put money into housing, so are less likely to be exposed to the most climate-polluting sectors.

Firms that are truly ethical will also publish their policies. Check whether they have policies to avoid funding things like oil, gas, and coal, and deforestation. This way, you can ensure that the whole firm is ethical, rather than just your particular fund, and that your money will stay in sustainable sectors even if the specific investments change.

For independent advice, and recommendations on the most climate-friendly investment options, check out Ethical Consumer’s shopping guides. We rate and rank dozens of companies and investment funds based on their investments in fossil fuels, deforestation, and other destructive practices, their environmental policies, and their targets to reduce their emissions.

Can I trust sustainability claims on ethical investment funds?

Unfortunately, greenwashing in the sustainable investment sector is rife. In 2022, research by Ethical Consumer found that almost a quarter of so-called ‘sustainable funds’ reviewed (23 out of 108) were invested in the world’s largest owners of coal, oil, and gas reserves, or were not disclosing enough information to accurately assess their investments.

Since then, the UK government has taken some steps to tackle the issue. In 2024, the UK’s regulator the Financial Conduct Authority (FCA) introduced an “Anti-greenwashing rule”, which requires firms to “ensure their sustainability references are fair, clear and not misleading, and proportionate to the sustainability profile of the product and service.”

The FCA also introduced new labels for investment funds with sustainability objectives:

• Sustainability Focus: Funds that aim to invest in assets that are environmentally and/or socially sustainable
• Sustainability Improvers: Funds that aim to invest in assets that have the potential to improve environmental and/or social sustainability over time
• Sustainability Impact: Funds that aim to achieve a predefined positive measurable impact in relation to an environmental and/or social outcome.
• Sustainability Mixed Goals: Funds that use a blend of the above approaches.

While the new rules do limit greenwashing in the sector, exemptions can still allow companies to use many sustainability terms without having a label, like ‘ESG’, ‘environment’, ‘green’, ‘impact’, and ‘responsible’.

Research by Ethical Consumer also suggests that these labels (in particular the ‘improver’ label) may still allow investments in harmful sectors. When Ethical Consumer looked in June 2025, for example, one fund using the ‘improver’ label was financing corporations involved in fossil fuels, union busting, and illegal Israeli settlements. In fact, only 70 percent of the investments in a labelled fund have to align with the chosen sustainability approach.

How do I check if an investment company is truly ethical or just greenwashing?

To ensure that you are investing in through firms you can truly trust, you might want to consider looking at their ethical investment policies. These outline the approach that the financial firm takes to deciding its investments and any red lines that it will not cross.

Strong companies will have clear policies to exclude investments in things like fossil fuels, arms, and companies involved in human rights abuses.

The most ethical companies will also publish all of their investments so that you can check you are happy with these. Many will be financing positive sectors for the future such as renewable energy and sustainable farming.

Alternatively, Ethical Consumer’s shopping guides rate and rank dozens of companies on their ethics, and recommend Best Buy companies that you can trust.

My main ethical concern is human rights. How do I find funds that avoid companies with poor labour practices?

The best way to find funds that avoid companies with poor labour practices is to check out investors’ ethical policies. Firms with a strong focus on labour rights will cover issues such as child labour, migrant workers, and payment of a living wage.

Policies may highlight criteria the investor expects companies to follow, such as ensuring no discrimination and respect for unionisation in their supply chains. Policies may also provide so-called ‘exclusion criteria’: sectors or practices that the investor will not fund. Examples could include the extraction of ‘conflict minerals’ or corporations that do not respect the need for health and safety.

If you’re concerned about wider human rights issues, non-profit advocacy groups have published a number of great reports naming and shaming banks financing abuses. A 2024 report, for example, highlighted the investment companies financing arms manufacturers that were selling weapons to Israel. Well-known banks like Barclays, Lloyds, and Santander were among those providing funding, according to the report, which was published by Pax and other non-profit groups.

Ethical Consumer provides information on links to the Israeli state’s apartheid, the funding of arms companies, and other human rights abuses in the articles linked. Its shopping guides rate and rank companies based on all this information and more. 

What's the difference between an ESG fund and a sustainable fund?

‘ESG’ and ‘sustainable’ are both used to describe funds that have some green investment criteria.

ESG stands for ‘Environmental, Social, and Governance’, and is essentially a framework that corporations use to assess their long-term impacts across a range of factors. ‘Sustainability’ usually refers to a company’s approach to environmental issues specifically, although it can be broader.

In reality, the two terms are often used interchangeably and don’t mark any clear easily-definable difference when used to label funds. Both can refer to a broad range of ethical criteria, which may be more or less robust depending on the investor’s approach.

Is it better to divest from unethical industries or engage with them as a shareholder?

There is no clear answer on whether it is more effective to divest from harmful industries or engage with them as a shareholder.

Advocates of divestment say that the approach is necessary to remove financing from harmful companies. Academic studies have shown, for example, that large-scale divestment from fossil fuels can help drive down the value of stocks in, and the economic return of, companies in the sector, as well as making them more likely to reduce carbon emissions, compared with other firms.

The tactic can also be a great way for campaign groups to shine the spotlight on a company, gain widespread publicity and media attention, and ultimately pressure the investor to change their approach.

Others argue that it is important to stay invested in harmful companies, so that you can engage with them and encourage them to change. Investment firms or individual investors can help bring shareholder resolutions or vote at corporations’ meetings – for example advocating for a firm to introduce stronger climate targets or cap the CEO’s pay.

Non-profit advocacy groups like ShareAction have had brilliant successes using shareholdings, and working with ethical investors in this way. For example, in 2021, shareholders in the oil company Chevron voted in favour of targets to reduce the company’s greenhouse gas emissions, a resolution brought by green shareholder group Follow This. In 2025, more than a quarter of investors in both M&S and Next voted in favour of improving pay to introduce the living wage, following work by ShareAction.

On this basis, lots of banks and other large funders also argue that they should stay invested in industries like fossil fuels. However, many of these corporations provide little information on how and when they have influenced the companies they finance, making it almost impossible to ensure the sincerity and effectiveness of their approach.

If you are an individual investor, we would therefore recommend: 

• Investing through a company that excludes financing of harmful sectors; 
• And/or getting involved in shareholder activism directly (rather than relying on a big investor to do this for you) through a trustworthy non-profit like ShareAction, which can guide you on how to use your investments for good.