An ethical stocks and shares ISA means different things to different people. To one person it means avoiding the fossil fuel and tobacco companies that form such a bedrock to so many funds.
To another it means compliance with Sharia law. It could also mean companies with more women on the board or better treatment of staff.
There are a range of ethical stocks and shares ISA options on the market. Alternatively, you could pick a broker and then form your own ISA by picking stocks that fit your requirements.
Finding an Ethical Stocks And Shares ISA
You may also want to pay attention to the broker you use. For instance, Hargreaves Lansdown founder Peter Hargreaves was a significant backer of the UK’s campaign to leave the EU which may concern some investors.
You may also want to consider a broker that treats its customers right. Some brokers provide stocks and shares ISAs as merely a magnet to draw customers into leveraged Contracts For Difference – short-term trading where gains and losses are amplified through effectively loans from the broker.
In contrast, a lot of recent fintech startups are founded on very ethical grounds. Freetrade are a very young and vibrant startup that is actively fighting against CFD providers that rip off their customers. Their whole ethos is that investing in the stock market should be free for all. Their stock universe now includes a huge number of ethical picks – from green energy, to tech startups which you can choose while avoiding anything you disapprove of.
There are a lot of new providers whose whole business model is ethical investing like Tickr. They are essentially a robo-advisor that invests your money in portoflios targeting subjects like equality and green energy.
Something else to be aware of when looking for an ethical stocks and shares ISA is a ranking known as Environmental, Social and Governance, or ESG.
These aren’t exactly a perfect science for the exact reasons we’ve discussed in deciding what counts as ethical. Nevertheless a good ESG rating can be a sign of a good company while their are funds and ETFs that focus on ESG.
It would be easy to assume that by focusing on social impact, the financial returns of ESG investing are limited. However, this is often not the case as good ESG companies tend to be more forward thinking generally.
In fact, plenty of the powerful NASDAQ tech market is naturally highly rated on ESG because tech startups developing software are naturally much more ethical on many measures than an old oil company.