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Funds to 'green' your Isa

Created:

22 March 2010

Written by:

Maike Currie

Interest in ethical investment looks set to grow after 13 per cent of individual savings account (Isa) investors revealed they were tempted to go green, according to a recent survey by The Co-operative Investments.

While mining companies driving the market higher over the past year has been a headwind to socially responsible investment (SRI) approaches, the share of the Isa market enjoyed by sustainable and ethical investments has grown almost two and a half times in size over the past decade.

One in every eight investors intending to beat the fast approaching 5 April deadline to use their 2009-10 Isa allowance claimed these funds would be a big part of their thinking, according to the findings.

This follows in the wake of a report published by the Conservative party towards the end of last year which looked into the key issues involved with launching a 'Green Isa' - a savings product in which all the funds invested would help to green the economy. Shadow chancellor George Osborne said at the time that a future Conservative government was committed to introducing 'Green Isas' and to make them a priority for any increase in the Isa tax-free savings limits.

In the meantime, advisers and fund managers say investors can 'green' their Isa by investing in open-ended funds, investment trusts and exchange-traded funds (ETFs) that offer exposure to the green/environmental investment market.

Nicola Donnelly, fund manager at WHEB Asset Management, said: "Investing your Isa in a 'green' fund is sensible given the high growth potential of the sector.

"We believe investors should capitalise on the market's short-term focus on Copenhagen and that sceptics should invest in three of the most compelling long-term themes of this generation; energy efficiency, prudent use of water resources and providing for an ageing population."

John Ditchfield, director at ethical independent financial adviser (IFA) Barchester Green Investment, adds that while there are very few green or environmental investment funds that generate much income, there is certainly strong potential for capital growth from investments into environmental markets. He said: "While many professional investors believe that the switch to renewable sources of energy is one of the big growth stories, the majority of Isa portfolios are still markedly underweight in this potentially rewarding sector."

Depending on an individual's risk appetite he recommended the Guinness Alternative Energy Fund, Impax environmental markets investment trust and the WHEB Sustainability Fund.