Go green with your ISA cash

Putting money into ethical funds which invest in companies involved in areas such as climate change is growing popular.

More investors than ever are turning to ethical investment for their annual ISA allowance, according to the Co-operative. Its research shows that 13 per cent of investors are likely to go green with their allowance this tax year, which is a massive leap over the current 1 per cent of the funds under management market that is held in ethical investments.

"Sustainable investment is not a niche for ethically-minded consumers," says Rod Bulmer of Co-operative Financial Services. "It offers a fantastic chance to grow investors' money over the long-term by exploiting the exciting investment opportunities from major changes occurring throughout the world."

In the last decade, interest in ethical and green investment has gradually risen. The amount of money held in ethical investments climbed from £2.8bn to £6.8bn while overall ethical finance – which includes banking, credit unions as well as investments – has almost tripled from £5.1bn to £14.4bn.

Co-operative Investments launched a new sustainable fund last July, to add to the two it already offered. The Sustainable Diversified Trust has since reached the top half of the IMA Cautious Managed Sector by size, overtaking many of the more established funds in what was one of last year's most popular sectors to invest.

Martin Bamford, of financial planners Informed Choice, says the popularity of the fund is no surprise. "Ethical and socially responsible investment will become conventional investments once the world faces up to future challenges," he says.

Of course the Co-op's Rod Bulmer agrees. "The need to tackle issues such as ageing populations, climate change and global power shortage are fundamental in global society, and will create investment opportunities for some time to come."

For investors looking for a decent home for their ISA money, ethical funds may not be able to provide the most startling of returns. For that investors probably need to take a greater risk and, if they are happy to, invest in less green funds. But with the Co-op's three funds investing in companies involved in such areas as healthcare, climate change, global power shortage, technology, global infrastructure, urban regeneration, sustainability and emerging markets, there could well be long-term growth.

Meanwhile, if you want a green home for the cash element of your ISA, the Triodos Online Cash ISA pays 2 per cent while using the money to support UK ethical enterprises. "If you're interested in finding out how it feels to bank ethically, but haven't yet taken the first steps, then our ISA is a great place to start," says Charles Middleton of Triodos Bank. "You'll get a decent return on your nest egg and the assurance that your money's making an active contribution to a more sustainable society."

However, because of Easter the latest you can apply for a Triodos ISA is Monday 29 March, as your opening deposit must be with the Bank by Thursday 1 April to be included in the 2009/2010 ISA allowance.

www.triodos.co.uk/onlineisa

www.co-operativeinvestments.co.uk