One of the best and easiest ways to invest your money in accordance with your principles is by opening a Stocks & Shares ISA. An ISA is an Individual Savings Account which allows you to put up to £20,000 into savings every year tax-free. A Stocks & Shares ISA lets you invest this money in active or passive funds, investment trusts, as well as individual bonds and stocks. The tax-free wrapper means you don’t pay any capital gains tax on the money you make from your investments.
To open an ISA, you have to go through an investment platform or a bank. There are a lot of providers out there offering Stocks & Shares ISAs, so it can be difficult to choose which one to go for. Luckily, New Money is here to help. Below, we have put together a list of the five best stocks & shares ISAs for ethical investing with the lowest annual charges to boot.
Armed with this and our exclusive list of the top 20 sustainable investment funds for 2020, you now have everything in your arsenal to start investing sustainably!
1. The Big Exchange
Annual fee: 0.25%
Launching later this year, The Big Exchange will be the place to go if you want to make an impact with your investments. Created by The Big Issue Group in partnership with 11 prominent sustainable fund managers, the aim of this new investment platform is to bring social and environmental impact funds directly to the people. So, naturally, you can expect to find a good selection of funds here that will match your principles.
The charge for using the platform will be 0.25% per year, or 25p for every £100 invested – on par with the cheapest options out there. Part of the mission of The Big Exchange is to create a level playing field for everyone, so no matter how much or how little you invest (you can start from £25), the platform charges will be 0.25% for everyone.
As with every other fund platform or bank, on top of this you will have to pay a fee to the fund manager once you have chosen a fund to invest in. All the funds offered on The Big Exchange are actively managed funds and the fees range from 0.62% to 1.5% per year. There is a cool calculator on the website that shows you, in pounds and pence, your expected (although not exact) costs depending on how much you invest. Check out our article, ‘How to read a fund factsheet like a sandwich’ to find out more about weighing up different investment funds.
Psst….Keep your eyes peeled for something extra special on picking the best green funds out there – COMING SOON!
2. AJ Bell YouInvest Stocks and Shares ISA
Annual fee: 0.25%
AJ Bell is one of the most competitively priced platforms in the market, also charging an annual fee of 0.25%. This means that if you have £5,000 to invest, you will pay around £12.50 per year (depending whether you invest in a lump or in chunks).
Although it does not focus specifically on impact or ethical investing (no other platform except The Big Exchange does), it has a strong range of ethical and sustainable funds to choose from. It also has an easy-to-use website, with useful articles and guide to help you along the way.
On top of your annual charge, you will pay £1.50 to buy or sell funds and £9.95 for shares, including exchange-traded funds (ETFs) and investment trusts. You can find a full list of the fees and charges here. After paying for the trade, you will also have to pay the management fee, as with all the other investment platforms.
3. Barclays Smart Investor – Investment ISA
Annual fee: min. £48
Barclays charges a minimum of £4 a month for an Investment ISA account, or 0.2% for investments in funds and 0.1% for other investments, whichever is higher. So the minimum you pay a year is £48, which makes it quite a bit more expensive than AJ Bell for smaller portfolios. In addition, you also pay £3 to buy and sell funds online, £6 for other types of investments and £1 per transaction for regular top-ups to your investments. The full list of fees can be found here.
This isn’t always the easiest site to navigate, but it does have a whole section on impact investing. This can help you learn about investing sustainably, and also has a handy list of sustainable funds and ETFs to choose from.
4. Fidelity Stocks & Shares ISA
Annual fee: 0.35%
If you invest at least £7,500 or open a regular savings plan, you pay 0.35% a year for this account. For a £7,500 portfolio, this amounts to £26.25 per year. If you invest less and don’t have a regular savings plan though, you will pay £45 annually. Dealing also costs £10 per deal or £1.50 if it’s within a regular savings plan. You can find a full breakdown of the fees here.
A useful feature is the ability to search through all the investments available on the platform to find funds that suit your principles. You can search for key terms such as “ethical”, “sustainable” or “ESG” to find funds that have these words in their name. You can also create a shortlist and compare how well the different funds have done over time. This can be a useful too even if you don’t go for an ISA with Fidelity.
5. Interactive Investor Stocks & Shares ISA
Annual fee: £119.88
Interactive investor charges a flat fee of £9.99 per month, no matter how much you invest, so it is better value for those with bigger investment pots. Otherwise, you’re better off using a provider with percentage-based fees.
However, each month you also get £7.99 of credit to buy or sell an investment, which you can use for 90 days. This is the cost of all UK and US trades, with regular investing being free. So if you intend to do quite a bit of trading and regular investing, then this is worth considering even for a smaller portfolio.
Interactive investor also recently launched its ACE 30 list of 30 ethical investment funds to help investors match their investments with their scruples. ACE stands for “Avoids Considers Embraces” to signify ethical funds with different investment styles.