Ethical investing

Invest in a more sustainable future that reflects your personal values and build a portfolio of companies that strive to have a positive impact on society and the environment.

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The sustainable investing ecosystem

Environmental, social, governance (ESG)

ESG has become synonymous with sustainability. But, more broadly, it’s about evaluating companies from an environmental (E), social (S) and governance (G) perspective.

Environmental

Social

Governance

Energy consumption Human rights Business ethics
Pollution, waste management Community engagement Equality and diversity
Climate change Employee conditions and rights Shareholder rights
Animal welfare Consumer protection Health and safety

Socially responsible investing (SRI)

Socially responsible investing (SRI) is an approach to investing that considers both financial return and positive social/ environmental outcomes. 

SRI practices include actively selecting or removing investments (negative-screening) depending on how a company ultimately affects the world around us. Investors might avoid stocks, ETFs or funds that engage in alcohol, tobacco production, gambling, weapons, animal testing, fossil fuel or human rights violations commonly because they are viewed to have a negative effect on society. Instead, investors might look for companies providing a net positive in the likes of education, social housing or environmental sustainability.

Impact investing

Impact investing is focused on supporting companies that aim to deliver a high degree of positive societal change and try to solve big challenges the world is facing. Being able to have clear and measurable goals, as well as quantifying impact, is at the core of these types of investments.

Greenwashing

The value of companies with high ESG ratings for investors isn’t lost on the corporate sector. But unfortunately that can breed exaggerations or plain false portrayals of their sustainable credentials in a bid to boost the brand image.

This greenwashing has increased over the past years, due to the rising demand for eco-friendly, sustainable products and transparency around company policies.

Savvy consumers are able to identify greenwashing practices through thorough research into each company and making sure that they live up to the claims they make.

Advantages

  • Supporting innovation and positive change across the world through companies that are aligned with sustainable values.

  • The possibility of better returns than companies likely to fall foul of regulations and fines due to subpar practices.

Disadvantages

  • Fewer stocks, ETFs, investment funds to invest into support a diversified portfolio.

  • Sustainability data is not widely available and individuals need to do a lot of research to guide their investment decisions and avoid greenwashing.

Renewable energy

Clean and green energy stocks are some of the most popular sustainable stocks Freetrade users are choosing to invest in.

Hydropower stocks - These might be companies that use water to generate electricity.
Wind power - These are companies involved in energy production from sources like wind turbines.
Solar energy - These are companies involved in solar energy production through the likes of solar panels, solar modules and systems and installation.
Geothermal technology - Companies using heat from the earth to produce energy, such as geothermal plants, drilling programs or geothermal products and services
Bioenergy - These are companies that are producing energy from biomass, also known as organic matter that stores energy from the sun (wood, plant matter, animal waste etc.)
Wave and tidal power - These are companies that create energy using the power of the ocean’s movements through waves and tides.
Sustainable transportation - These are companies that work on technologies that develop alternative ways to power vehicles.

Renewable energy stocks on Freetrade

Note that the above is not an exhaustive list of sustainable stocks and shares to invest in available on Freetrade. The list is not built taking in consideration a specific EGS criteria, it’s solely a collection of companies whose explicit aims fit with ESG principles or who are actively aiming to incorporate high ESG credentials into their businesses at the date of publishing this page.

Sustainable ETFs available to invest
in on Freetrade

Choose ETFs with a focus towards sustainability and social responsibility to provide broader market exposure to companies that have high standards of ESG and SRI.

Name

Ticker

Focus

iShares MSCI World ESG Enhanced UCITS ETF USD (Acc.) EGMW World ESG stocks
iShares MSCI EM SRI UCITS ETF USD (Acc.) SUES ESG companies
iShares MSCI Europe SRI UCITS ETF EUR (Acc.) IESG European ESG stocks
iShares Dow Jones GlobalSustScr UCITS ETF USD (Acc.) IGSG Global ESG stocks
iShares MSCI Japan SRI UCITS ETF USD (Acc.) SUJA Japan ESG leaders
iShares MSCI USA SRI UCITS ETF USD (Acc.) SUUS US ESG leaders
UBS (Irl) ETF plc - MSCI United Kingdom IMI Socially Responsible UCITS ETF (GBP) A-dis UKSR UK firms with ESG focus
UBS ETF - MSCI World Socially Responsible UCITS ETF (USD) A-dis (GBP) UC44 Companies with ESG focus

Ethical ISA

The great thing about a stocks and shares ISA is that you can put the investments you want in it. That means you have the ability to match your money with your morals and avoid the stocks you’re just not keen on. 

ESG ETFs might be able to help give general exposure to firms with high ESG scores, and then there are the stocks themselves. There used to be a belief that we had to give up some returns to satisfy doing some good in the world but that’s just not true. 

Companies with an eye on treating their staff, customers and the environment well might even be exposed to less reputational damage or fines from falling foul of regulators. Keep watch though, you want to make sure they don’t drift from the aims you bought into.

Ethical pension

Similar to an ISA, it’s not the pension itself that takes on a sustainable label, it’s what you put in it. And it’s that sustainability that might be most important to your long-term pension savings.

If a company is staring tougher regulations in the face because it is harmful to the environment, the society in which it operates, or isn’t governed well, that could mean a slow and painful demise.

The flipside of this is that companies leading the way in terms of ESG standards and running their businesses well over the years might even become more valuable the bigger they get.

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