We review Ethical Junior ISAs and discuss how your family, and the planet, can benefit from them

Ethical Junior ISAs offer tax free, long-term savings in funds that are invested in companies who approach business in a sustainable way.

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What are Ethical JISA's

Ethical Junior ISA's are long term savings accounts for children which invest in companies who take an ethical approach to doing business.

Ethical Junior ISAs are tax efficient and are normally Stocks and Shares JISAs, meaning their fund managers use the stock markets around the world to invest in. .

When investing in a Ethical JISA its important to compare the features of the different products available to ensure they meet your values - and to look at the investment companies past record as a guide as to how well they have managed portfolios in the past.

How can Ethical JISAs help sustainability?

Different ethical JiSA's have slightly different definitions when it comes to the credentials of companies they invest in.

However if you are investing in a managed ethical fund they tend to set broadly similar criteria which ensure that the companies invested in have signed up to standards such as the UN Global Compact, and therefore ensure they meet set criteria for how they treat their labour force, run their business in a sustainable way, have anti-corruption standards in place and protect human rights.

They will also avoid investing in companies involved in certain industries such as the fur trade, gambling, pornography, alcohol or tobacco production or the weapons industry.

Another option is for an individual to create their own Ethical JISA and self select specific investments that meet their their personal criteria - for instance green energy companies or companies who only deal with fairtrade farmers.

Are Ethical JISA's more risky that their standard counterparts?

To a degree yes - because the pool of companies into which investments can be made is smaller - that means if one fails it is likely to make up a larger portion of your portfolio than in a standard fund.

However it may be that because the companies who can be invested in set higher standards in board accountability and governance that the risk of failure is lower in the first place.

At the current time its difficult to say as the track record of ethical investing is relatively limited and therefore it will be a number of years before real performance comparisons can be made.

This content was last reviewed on 21/11/2023

Image courtesy of: Robin Stott