How can I make my ISA more ethical?

More and more investors want their ISAs to do more than just grow their wealth — they want their money to have a positive impact. Ethical, sustainable, and responsible investment funds now account for £106 billion of assets under management, roughly 7% of the total AUM, according to the Investment Association (IA)*. To put that into perspective, that’s nearly double the amount held in ethical funds just five years ago*.

Sustainable investing is now operating in a more complex environment today, however, we would argue that having an element of sustainability in your ISA is a strong diversifier to any portfolio — but when it comes to building a more ethical ISA, where do you start? And what does ‘ethical’ actually mean in practice?

The good news is, there’s a growing range of options — from green bond funds to ESG-friendly equity funds and even multi-asset ethical portfolios. The challenge is finding an approach that suits you and your goals.

The complex nature of ethical investing 

The biggest challenge: there’s no universal definition of ethical investing. What feels ethical to one investor might not sit right with another. Even funds labelled ‘sustainable’ or ‘ESG’ might include companies you personally wouldn’t want to support.

For me, ethical investing is shaped by my background. My education focused heavily on gender injustice and human trafficking prevention — so it’s crucial that the companies I invest in have clear anti-forced labour and anti-trafficking policies in their supply chains. I actively seek out fund managers who engage companies on these issues — not just avoiding the worst offenders, but working to improve standards across industries.

At the same time, animal welfare is another non-negotiable for me. I won’t buy from brands that test on animals, and I expect the same standards from my investments. I seek out funds that screen out companies involved in animal testing or intensive factory farming, even if those companies otherwise score well on ESG factors.

Everyone’s ethical checklist will look different — and that’s okay. The challenge is finding funds and managers whose approach aligns with your personal values.

Three ways to make your ISA more ethical 

There’s no one-size-fits-all approach to ethical investing. You can gradually shift part of your ISA or take a complete ethical approach — it’s up to you. Here are a few ways to make your ISA more ethical:

1. Sustainable equity funds – UK, global, and regional

If you want to invest in companies leading the way on sustainability, equity funds focused on ESG leaders are a great option. The global market for ESG investing surpassed $30 trillion in 2022 and is on track to surpass $40 trillion by 2030, according to an ESG report from Bloomberg**. They also forecast that by 2030, 25% of the $140 trillion AUM globally will be ESG assets, with Europe set to remain the largest in ESG assets**.

You can choose from a wide range of equity funds depending on your portfolio. Many of these funds use positive screening (seeking companies with strong ESG credentials), negative screening (excluding harmful industries), or a mix of both.

Those wanting a generalist global fund with a focus on sustainability might consider the CT Responsible Global Equity fund. This is a core global equity holding with a long-term buy and hold approach. What makes this fund stand out from the crowd is the strength of the responsible investing team: it is a separate unit meaning bespoke analysis which is truly independent. The fund’s process is also very thorough, with in-depth customised analysis of companies, making for very considered stock selection.

For regional exposure in Asia, we would highlight two funds. Stewart Investors Asia Pacific Leaders invests in mid and large-cap companies that are either based in, or have significant operations in the Asia Pacific region including Australia and New Zealand, but excluding Japan. We particularly like the fund’s focus on stewardship and willingness to be different from its benchmark.

The FP Carmignac Emerging Markets fund also targets mid and large-cap companies, however has a focus on emerging economies. This high-conviction fund is a strong candidate for any investor looking for emerging market exposure, but combined with their strong focus on ESG criteria, it’s an excellent way to add a more ethical tilt to your portfolio.

Our final equity fund would be Janus Henderson UK Responsible Income. Manager Andrew Jones has extensive experience in the equity income space and has a common-sense approach to this fund, allowing screens to filter the universe, followed by in-depth analysis on the remaining opportunities. For those looking for a sustainable yield, in both senses of the word, this makes for a great option for investors.

2. Ethical fixed income funds

Sustainable investing isn’t just for equities. Green bonds — which finance projects like renewable energy or sustainable agriculture — have exploded in popularity. The global green bond market has reached $5.7 trillion, according to the World Bank***. 

In the UK, several bond funds now apply ESG screens, avoiding investments in companies or governments with poor human rights records, high carbon footprints, or involvement in controversial industries like tobacco or weapons. Adding sustainable bonds can help balance the risk in your ISA while also adding an element of “green” to your portfolio. 

We’d highlight the newly Elite Radar Rathbone Greenbank Global Sustainable Bond for those wanting a green lens to their fixed income exposure. This global bond fund follows a ‘best ideas’ approach, focusing on sustainable themes aligned with the UN Sustainable Development Goals and investments that contribute to a more sustainable world. Run by Bryn Jones, manager of the Elite Rated Rathbone Ethical Bond fund, the team behind this fund has a proven track record and early performance has shown the team can invest responsibly without sacrificing investment returns. 

3. Multi-asset sustainable funds

If you want a one-stop ethical portfolio, some fund managers now offer multi-asset sustainable funds. These funds combine equities, bonds, and other assets — all selected with ESG criteria in mind. With options ranging from cautious to adventurous risk profiles, these funds can be a simple option if you want ethical investing without the added research element. 

The Liontrust Sustainable Future Managed fund has a well-defined process which has emphatically proven that sustainable companies have better growth and are more resilient than the market gives them credit for. Backed by one of the most experienced and well-resourced teams, it has proven its ability to outperform over the past two decades, delivering over 336% for investors, compared with 205% for the sector^. The fund has also outperformed the sector over 5 and 10 years^^. 

Manager Peter Michaelis joined us recently on the Investing on the go podcast to explain why the fund has underperformed over the past three years and how the fund is positioned going forward.

How to get started in your own ISA

Remember, the perfect ethical ISA doesn’t exist — and that’s okay. What matters is that you build something that feels right for you. Here’s a few questions to ask yourself:

• What issues matter most to me? (Climate change, human rights, board diversity, animal welfare?)
• Do I want to avoid harm, support good, or both?
• How hands-on do I want to be — do I want to pick individual funds, or use a ready-made ethical portfolio?

Most UK investment platforms now offer ethical fund filters, making it easier to narrow down your choices. Additionally, many fund managers also publish detailed sustainability policies, so you can see exactly how they define ethical investing.

Or you can cut out the middle man and use FundCalibre’s ESG classification to help when filtering funds. To keep things simple, we assess each fund as either ESG Explicit, ESG Integrated or ESG Limited.

ESG Explicit funds are those that have an ESG/sustainable approach at the forefront of their investment philosophy. (All of the funds highlighted in this article have been ESG Explicit.) While ESG Integrated funds are those that embed ESG analysis within the investment process, as a complementary input to decision making. Those funds identified as ESG Limited are those where the overall portfolio will not be materially influenced by ESG.

Read more about how FundCalibre assesses ESG criteria

*Source: Investment Association, 6 February 2025

**Source: ESG Investing, 8 February 2024

***Source: World Bank, July 2024

^Source: FE Analytics, total returns in pounds sterling, 4 March 2005 to 4 March 2025

^^Source: FE Analytics, total returns in pounds sterling, at 4 March 2025