Ethical investing in ISAs: ‘It’s ensuring you are not supporting slavery or inhumane conditions’

Investors should weigh up what’s important to their values - as well as factoring in fees and potential growth

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Growth may be the ultimate aim for most savers and investors when it comes to their money but there are other factors to consider.

Some savers are facing the delicate balance of managing their values or faith and finances at the same time.

This creates a challenge for 44-year-old Meerat Kaur who is Sikh.

She told The Independent: “The Sikh religion is fundamentally anti-oppression. As part of that I try to buy as ethically as I can in everything from the coffee I drink to the jeans I wear. I want to make sure my money doesn’t fund oppression.”

Meerat started looking for more ethical places to put her ISA money in 2019 and admits it wasn’t easy.

She said: “It is hard to find ethical banking and ethical ISAs, in particular stocks and shares ISAs, that give a good return and are ethical. It’s such a huge loaded term as well. Sometimes banks might hide behind it and still fund arms companies.

“For me it is about not investing in business which can lead to human deaths and ensuring you are not supporting slavery or any inhumane conditions.”

(Meerat Kaur)

The ethical challenge

She researched the best ISAs using the Ethical Consumer website and came across Triodos Bank which offers ethical and sustainable projects that can be funded through a cash and stocks and shares ISA.

Meerat has around £65,000 across both types of tax wrapper.

One criticism of responsible investment or environment, social and governance (ESG)- focused investing, is that you often have to sacrifice returns.

Meerat admits this is an issue but says she has still earned around seven per cent from her stocks and shares ISA and 4.5 per cent in the cash product.

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(Getty/iStock)

She added: “It is unfortunate that returns are lower but it was important for me to figure out where I sit on the whole ethical spectrum.

“You need to look at the level of return you are willing to forego and what you are and aren’t willing to fund. It takes a lot of research though and it would be good if that was made easier.”

Ethical investing options

Roger Hattam, director of retail banking at Triodos Bank UK, said: “We’re seeing continued demand for sustainable ISAs, with deposits growing year on year, demonstrating that people want their savings to have a positive environmental and social impact, in addition to offering a financial return.

“While ESG investing continues to battle political headwinds it is positive to see some savers and investors are still looking to align their money with their values."

Triodos Bank is just one option for ethical investors. It is also possible to build your own ethical ISA using specialist funds on an investment platform but you need to check for fees that will eat into your returns.

Interactive investor has its own ACE 40 list of sustainable funds for building a portfolio.

(Getty/iStock)

Rachel Springall, Finance Expert at Moneyfactscompare.co.uk said ethical brands are a great choice for consumers looking to align their finances with their personal values.

She added that returns can often be lower though: “As awareness increases, ESG investing can become a more popular option, but its vital consumers seek advice before entering any arrangement to ensure their choice aligns with their ideals.

“Investing should typically be considered for the medium to longer-term to ensure the pot has time to recover from any stock market volatility. In addition, fund management fees vary, so any ongoing charges eat into potential returns.

“Those who do not want to dip their toe in the stock market can fund a handful of ethical providers which offer a cash ISA, the returns might not be market-leading, but the firms champion ethical principles and gives back to communities.”

When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.