Interactive Investor

Top 20 most-bought sustainable funds, trusts and ETFs in ISAs

18th February 2022 12:12

Jemma Jackson from interactive investor

interactive investor looks at the most-bought sustainable investments among ISA customers, over the current tax year to date - from 6 April 2021-16 February 2022.

  • interactive investor looks at the most-bought sustainable investments among ISA customers, over the current tax year to date - from 6 April 2021-16 February 2022.
  • Baillie Gifford Positive Change is first, followed by iShares Global Clean Energy UCITS ETF, and then Greencoat UK Wind plc.
  • ii’s ethical investing long list, ACE 40, Quick-Start sustainable range, and Ethical Growth Portfolio helps investors get started on their sustainable investing journey.

‘Ethical’ or ‘responsible’ investment is a continuously evolving marketplace, encompassing a variety of approaches and products designed to help investors ‘do good’ with their money.

This is particularly apparent looking at the depth and breadth of best buys on interactive investor, the UK’s second-largest DIY investment platform.

The urgency of the climate agenda, as well as changing attitudes towards (and more awareness of) companies’ social practices, has sparked an increased amount of retail investor awareness for sustainable investment products.

This has been reflected by UK policymakers, as well – we’ve seen increasing initiatives from the Treasury and the FCA, to meet, and encourage, this demand, and to help retail investors find the products that truly meet their ‘green’ expectations.

Today, interactive investor, the UK’s second-largest DIY investment platform, highlights the most-bought funds, investment trusts, and ETFs, in ISAs from its ethical long list from the 6 April 2021-16 February 2022.

While there’s plenty of generalist ‘sustainable’ funds on the list, headed up by Baillie Gifford Positive Change, impact funds are featuring strongly. iShares Global Clean Energy ETF (LSE:INRG) is in second place, while six of the top 10 are investment trusts, many with a focus on renewable energy infrastructure. While ‘real assets’ such as infrastructure are often seen as a way of protecting against rising prices, the popularity of these trusts pre-dates the current ‘red hot’ inflationary environment, and yield could well be a key driver.

Half of the top 20 are ‘impact’ type investments, focussing on issues-based investments such as renewable energy, social housing, waste management and founding, building and funding transformational healthcare companies.

What does the current rotation into value stocks mean for ethical funds?

Kyle Caldwell, collectives specialist at interactive investor, says: “In 2021, there was plenty of investor appetite for funds that invest in a socially responsible fashion. Figures from the Investment Association* showed that over the year, £16 billion was invested in responsible investment funds. This was £4.3 billion higher than in 2020 – a significant amount of growth.

“While there have been various drivers behind the increased levels of popularity, the strong performance of many ethical funds in recent years has surely helped. A tailwind that has provided a boost to performance for ethical funds has been the growth style of investing being in favour. But in recent weeks, this tailwind has turned into a headwind amidst a market rotation away from growth and into value, with some investors suggesting a potential end to the decade-long run for growth shares as interest rates rise in an attempt to combat high inflation.

“Value shares, which are often more economically sensitive and benefit from higher interest rates, often fail to meet the requirements of funds that focus on environmental, social, and governance (ESG) criteria. If this market rotation is sustained, it will be interesting to see whether this dents the popularity of ethical funds in the months and years to come.

“In reality though, any potential ‘great rotation’ towards value is unlikely to go in a straight line, and as always balance is key. Investing ethically is all about doing well by doing good, and those who genuinely want to invest within an ethical framework have plenty of choice in a sector that has grown in depth and breadth. Looking at the best buys over the current tax year showcases the variety of offerings with some tangible social benefits.”

Rebecca O’Connor, Head of Pensions and Savings, interactive investor, adds: “Some ESG-focused investments took a hit early in the year as macro-economic factors, such as a rise in interest rates, became unfavourable and certain sectors that feature heavily in ESG funds including technology, suffered declines as a result. However, some investors may feel that the values among funds in this area, having fallen, now look attractive again.”

Top 20 most-bought investment products (ISAs) on ii’s ethical long list, from the 6 April – 16 Feb

Ranking

Company Name

 

Product

1

BAILLIE GIFFORD

POSITIVE CHANGE B ACC

Fund

2

ISHARES II PLC

GBL CLN ENERGY UCIT ETF GBP

ETF

3

Greencoat UK Wind (LSE:UKW)

ORD GBP0.01

Investment trust

4

Impax Environmental Markets

ORD GBP0.10

Investment trust

5

Gore Street Energy (LSE:GSF)

ORD GBP0.01

Investment trust

6

Renewables Infrastructure Group (LSE:TRIG)

ORD NPV

Investment trust

7

RLUM LIMITED

RL SUSTNABLE WRLD TST C ACC

Fund

8

RLUM LIMITED

RL SUSTNABLE LDRS TST C ACC

Fund

9

Bluefield Solar Income (LSE:BSIF)

ORD NPV

Investment trust

10

JLEN Environmental Assets (LSE:JLEN)

ORD NPV

Investment trust

11

Civitas Social Housing (LSE:CSH)

ORD GBP0.01

Investment trust

12

NextEnergy Solar (LSE:NESF)

RED ORD NPV

Investment trust

13

Syncona (LSE:SYNC)

ORD NPV

Investment trust

14

MONTANARO AST MGMT

BETTER WORLD GBP DIS

Fund

15

FUNDSMITH LLP

SUSTAINABLE EQUITY ACC

Fund

16

LIONTRUST FUND PAR

SUST FUTURE GBL GTH 2 ACC

Fund

17

BMO GBL ASST MGMT

SUST UNIVERSAL MAP GROWTH

Fund

18

BMO FUND MGMT LTD

BMO RESPONSIBLE GBL EQTY 2

Fund

19

BMO GBL ASST MGMT

SUST UNIVERSAL MAP BALANCED

Fund

20

RATHBONE UT MGT

ETHICAL BOND INSTL ACC

Fund

Source: interactive investor

Kyle Caldwell, collectives specialist, interactive investor, says: “The most popular ethical fund with interactive investor ISA customers is Baillie Gifford Positive Change, and I’m interested to see whether it maintains its place at the top of the table in the next couple of months.”

The ‘E’ in ESG has been a particularly prominent theme for ii investors over the last tax year – trusts with a renewable energy focus feature heavily in our most bought list. And we can also see investors looking for exposure to alternative investment products, such as energy storage.

A reminder to stay vigilant for greenwashing

Kyle Caldwell, collectives specialist, interactive investor, says: “When it comes to ethical funds, investors need to be wary of ‘greenwashing’, particularly in light of the huge number of fund launches and modifications to existing funds in the ESG space over the past couple of years.

“An important thing to consider is the ethical heritage of the fund management team. A novice fund manager at the helm may do a good job, but a fund management team with experience of investing ethically way before it became trendy reduces the risk of greenwashing. In our top 20 most-popular funds: Royal London, BMO, and Liontrust all feature – all of which have plenty of experience in the ESG space.”

Investors can explore sustainable investing further by looking at ii’s ethical investing long list, ACE 40 rated list, and Quick-Start sustainable range from BMO, as well as its Ethical Growth Portfolio.

*The Investment Association uses its Responsible Investment Framework as a way to categorise ‘ethical’ and ‘responsible’ funds.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.