Saving for the future is important, and so is staying true to your values.
Wealthify has joined forces with best-in-class ethical fund providers to create a range of five Ethical Plans that let you invest in organisations committed to having a positive impact on society and the environment.
All our fund providers are signatories of the Principles of Responsible Investing (PRI), the world’s leading proponent of responsible investing. They actively-manage their ethical funds, keeping a close eye on the organisations in which they invest, and employing rigorous ongoing screening to ensure that ethical standards are maintained.
So now you can do your bit for the future and give your money a chance to grow.
There’s estimated to be over £19 billion invested in ethical funds in the UK alone. Globally the figure is more like $80 billion.
Ethical investing is a catch-all term for various forms of sustainable investing, such as Environmental, Social and Governance (ESG), Socially Responsible Investing (SRI) and Impact Investing.
The UK’s first ever ethical fund launched way back in 1984. It was called the F&C Stewardship Growth Fund.
Wealthify Ethical Plans aim to exclude industries and activities that are considered harmful to society and the environment, from tobacco and gambling to deforestation and unfair labour practices.
We only invest in organisations committed to making a positive impact through their environmental, social and governance (ESG) practices, so you can invest in a sustainable way.
If you want to learn more about our Ethical Plans, download our Ethical Guide.
Our ethical fund managers regularly monitor the activities of the companies they invest in and can use their shareholder influence to maintain and raise ethical standards.
Our investment team use a bespoke optimisation tool and regularly review your Plan to keep performance on track.
Above all, we aim to make sure your investments take advantage of the good times and are sheltered from the bad.
Please bear in mind the value of your investments can go down as well as up and you may get back less than you invested.
Ethical Investing aims to exclude profiting from activities that are considered harmful to society and the environment and to invest in organisations, companies and projects that are committed to operating in a way that is sustainable for the future.
This is typically done by filtering out harmful activities (negative screening) and proactively seeking to invest in companies that are committed to making a positive impact through their environmental, social and governance (ESG) practices (positive screening).
Negative screening: most ethical funds will screen the so-called ‘sin stocks’ such as tobacco, gambling, weapons and adult entertainment. Other issues screened might include animal testing, intensive farming, nuclear power, genetic engineering, deforestation, and poor human or labour rights. The activities screened and the screening criteria used, vary between fund providers.
Positive screening: aims to identify those companies demonstrating or showing commitment to achieve the highest standards of practise in the areas of environmental impact, social justice and corporate ethics. Only organisations that score highly across these three areas will be eligible to receive investors’ money.
Wealthify’s ethical plans combine negative screening with proactive selection based on ESG scores, as well as qualitative, human consideration of a wide range of other factors that contribute to a commitment to future sustainability.
Ethical investing is one of a number of terms used to identify sustainable approaches to investing. Others include: Environmental, Social and Governance (ESG), Sustainable Investing and Impact Investing.
Our ethical Plans are built using a combination of mutual funds and ETFs (exchange-traded funds). The funds contain multiple investments, selected by the fund providers according to their strict ethical screening processes.
The funds will typically include:
Shares (owning a piece of a company): excluding companies that profit from ‘sin sectors’ such as gambling, tobacco, adult entertainment and weapons among others. It will only include companies that demonstrate great environmental, social and governance standards, according to the fund providers’ and Wealthify’s strict criteria and ethical investing policies.
Bonds (an IOU from a government or company with some interest): both corporate and government bonds may be included and will be subject to the same strict screening criteria as shares.
Thematic investments: one or two funds will focus on investing themes such as gender equality (companies that strongly champion these issues) or green energy and will mostly be used in higher risk plans.
We’ve created five Ethical Investment Plans – from Cautious to Adventurous – so you can choose a level of risk that’s right for you. Find out more about what’s in each of these plans by downloading the ethical plan factsheets, below.
Ethical Plan Factsheets
We have a pool of up to 25 funds with which to build your ethical plan. The combination of funds we use depends on which investment style you choose and how we decide to balance your plan. The pool of funds will also change from time to time.
We’re using active (rather than passive) ethical funds in our plans, so-called because they are ‘actively’ managed to ensure that the investments within maintain the high ethical standards required. We think this is a robust way to manage our ethical investment plans, since actively managed ethical funds can take a far more qualitative approach: using a wider set of criteria and applying a common-sense approach to selecting sustainable investments. Passive funds on the other hand use a fixed ESG score to screen companies, offering little flexibility. Passively-managed ethical funds are also unable to exert shareholder pressure on individual companies in order to drive for positive change.
Current list of funds:
Please note: the funds and fund providers we use will be reviewed and may change from time to time, which may not immediately be reflected here.
Ethical fund managers will regularly search for new companies to invest in, whilst also monitoring the activities and practises of the companies already in the fund, to ensure expected standards are maintained.
As shareholders, funds can even use their influence and voting power to steer the organisation towards ever higher ethical standards, attending AGMs and lobbying the board of directors. Where the fund holds a significant shareholding (e.g. 10% or more) they may get an audience with the board of directors where they can highlight issues and help influence the strategic direction of the organisation. Ethical fund providers sometimes join forces to wield more influence over the board, if their own shareholding is too small.
If a company consistently allows its standards, and therefore its ESG rating, to slip, fund managers are able to withdraw investors’ money and remove the company from the fund.
All ethical fund providers have built a level of independent verification into their processes, usually carried out by an autonomous and impartial organisation, to ensure that no bias creeps into the fund’s screening and monitoring process.
Wealthify also has its own code of practice, set out in our ethical investing policy. Our investment team will regularly monitor the ethical funds using specialist ESG company assessments conducted by a third party, to ensure that their standards of practice are not falling below what is expected.
Each fund provider will negatively screen (i.e. exclude) companies involved in certain sectors and activities. Typically, these will be ‘sin sectors’ such as gambling, tobacco, adult entertainment and weapons. The full list of sectors considered can be much wider.
The exclusion criteria also vary between providers: some funds will completely exclude a company profiting from harmful activities (e.g. tobacco) whilst others may invest in the company, provided it earns no more than 10% of its overall profits from the activity in question. This 10% tolerance allows a small degree of flexibility to account for instances where a company isn’t directly involved, but could be exposed to a harmful activity via, for example, a parent company or supplier. Fund managers argue that earnings of less than 10% demonstrates there’s effectively no significant involvement in that activity and an investment in the company is justifiable.
A 10% tolerance is applied to the screening of some activities by the fund providers we use. Therefore, we can never guarantee that our plans will not contain some degree of exposure to any of the harmful activities listed.
Our ethical funds aim to exclude the following, subject to an up to 10% tolerance:
Weapons; gambling; animal testing; deforestation; nuclear power; climate change; oppressive regimes; adult entertainment; tobacco; excessive political donations; human rights issues; intensive farming; unfair labour practises; genetic engineering.
Returns are not guaranteed with any form of investing and you could get back less than you put in.
With all types of investing, cost affects your performance, as the more you pay in fees and charges, the fewer returns you get to keep. The overall cost of investing in an ethical plan is higher than that of a standard plan and therefore, investing in an ethical plan may affect performance and your returns could be lower than a standard investment plan with an equivalent investment style. Ethical funds aim to avoid investing in certain sectors, like tobacco or gambling, which could also affect your plan performance.
You can get some idea of how ethical investments perform against their standard counterparts by comparing market indices like the FTSE for Good against the FTSE All Share. Of course, past performance is not a reliable indicator of future performance.
We use a blend of active and passive funds in our ethical plans, so the average fund charge is a little higher than in standard plans. Check our fees page for the most up to date ethical fund charges and transaction costs. The extra cost of active funds reflects the fact that they are proactively and comprehensively managed using a qualitative and common-sense approach to select the most appropriate investments and to ensure standards are retained. We think this makes for a more robust ethical investment plan.
Founded in 1975, Vanguard is a US-based investment management company holding over $3tn in assets under management. Vanguard is the largest provider of mutual funds and the second largest provider of exchange-traded funds (ETFs) in the world.
From Edinburgh and London, Kames Capital manage £44.2 billion on behalf of UK and international clients. Kames Capital’s heritage dates back to 1831, when the Scottish Equitable Life Assurance Society was founded. Their assets are managed by their investment team comprised of 91 members.
Royal London Asset Management (RLAM) is one of the UK’s leading fund management companies managing around £117 billion of assets. RLAM was established in 1988 and is a wholly owned and central part of the Royal London Group.
EdenTree was founded in 1988 and manages £2.7 billion in assets. EdenTree was started as a means for Church of England administration to build wealth to support their clergy. Its remit now extends beyond the Church of England to encompass wider charitable and ethical concerns.
UBS was founded in 1862 as the Bank in Winterthur, now headquartered in Zurich and Basel, the UBS group is a global firm providing financial services to corporate, private and institutional clients. The asset management division employs around 3600 people including over 900 investment professionals.
LionTrust are a specialist fund management company launched in 1995 and was listed on the London Stock Exchange in 1999. LionTrust are an independent business with offices in London, Edinburgh and Luxembourg. LionTrust manage assets in the region of £11.4 billion.