Life principles can play a part in investment strategies for some consumers. Those that wish to invest in ethical, socially responsible and green products, for example, can use both their cash and investment ISA allowances to meet their personal preferences. What are the pros and cons of investing in an ethical ISA?
The Advantages of Saving and Investing in Ethical ISAs
These savings and investment products prove popular with consumers that want to extend their beliefs and ethics to their money management techniques. Ethical ISAs come with a few advantages. These include:
- The consumer can invest in institutions and projects that meet their own life beliefs and ethical leanings. An individual that is concerned with environmental issues, for example, can find green ISA accounts where money is invested in areas beneficial to the environment. An individual that wants their investment to do some social good can look for ISAs that promote and fund social responsibility projects.
- The consumer can avoid investing in companies and sectors that they are opposed to. So, for example, an individual can decide not to put their money into accounts that operate in so-called negative sectors (i.e. arms, tobacco, gambling) or companies that do not promote good practice (i.e. those with bad human rights records).
- The money that is invested does more than simply earn interest or give a rate of return. Ethical, socially responsible and environmentally beneficial funds go to the work-face and can make a real difference.
Before opting to look into ethical ISAs as an investment vehicle, however, consumers may be wise to also consider potential downsides.
The Disadvantages of Saving and Investment in an Ethical ISA
Although the choice of investments and savings in ethical ISAs are meant to help consumers make choices that suit them, this may not always be as advantageous as it seems. Some of the downsides of these products include:
- The consumer may find it difficult to find accounts and products that meet all of their ethical drivers. Although some financial institutions and funds claim to offer relevant options this may still not be enough for some. An investment ISA, for example, may invest in green projects and companies but, at the same time, it may also invest in the tobacco industry. It may take a little research to find the right ISA that works on all the right principles for the investor.
- It is a commonly held belief that ethical ISAs won’t give the same rates of return as regular products. This may not be true in some cases but interest rates and investment returns can vary widely in this part of the ISA sector. In some cases investing in green, socially responsible and generally ethical ways may not bring in as great a return as standard investments in industries where more money is to be made.
It is possible to find the right kinds of ethical cash and investment ISAs although it may take some research and a little digging around to find the best interest rates and potential returns. Sites like YourEthicalMoney may be useful in the search to find true ethical investments. This site gives a useful analysis of the corporate policies and investment strategies of many UK financial institutions and ISA products.
Those looking to use an ethical investment ISA may also find it valuable to investigate the types of products that they can use. There are many different ways to set up this kind of product and it may be worth looking at self-select options which allow the individual to choose exactly where their money goes. Finally, it’s also a good idea to check over ISA rates and performance tables before making a final decision to try and maximise investment returns.
Carol Finch - Carol Finch is the Topic Editor for Retirement Planning, Budgeting, E-Commerce & Technical/Business Writing on Suite101.
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