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How can we invest ethically while saving for a house?

20 July 2021

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Question by Emma

My husband and I are in our mid-30s and are completely new to investing. We have over £100,000 split between our two cash ISAs. As we are intending on purchasing a house in the next 5 years, the majority of our savings will be used for a deposit. However, we would like to make a long term investment (minimum 10 years), so are intending on putting £10,000 each in a Stocks and Shares ISA, as well as an ongoing £500 each a month. We're happy with some risk i.e. 6-7/10. Whilst we know this might be a tad trickier, we're really keen on investing in ESG funds/companies only. As we'll have a Stocks and Shares ISA each, we're not sure how best to 'diversify' and whether that's even possible given we want to make ethical investments? Would it be better if one of us uses a robo-adviser and the other a traditional platform? For one to go for an active and the other a passive approach (although I'm not sure if there is an ethical index)? Should one go higher risk than the other? Any guidance would be appreciated, Emma

Answered by Boring Money

First of all...
Although I don’t know your specific circumstances, so cannot give you advice, your proposed approach of clear differentiation between cash set side for a house purchase, and long-term investment monies strikes me as very sensible.

It is also worth noting, on the risk point you mention, that you could consider a slightly higher risk approach for the £500 per month than for any lump sums, even if those lump sums are invested on 10+ year timescale. The £500 per month will de facto get drip-fed into the markets.

You’ll need to be careful, of course:
As and when you get within five years of potentially wanting to access the monies. At that point, you might want to go the other way, and start steadily reducing the risk profile on both your regular investments and the capital you’ve built up.

Robo vs Traditional
Regarding your thought process around robo-adviser vs. traditional platform - it’s worth differentiating financial planning on the one hand, with access to underlying investment funds/portfolios on the other.

Both might be provided/mimicked by a robo-adviser proposition, but traditional platforms such as AJ Bell Youinvest and Hargreaves Lansdown (I assume that’s the sort of thing you are referring to as 'traditional') tend to only offer options around self-directed/’DIY’ investment selection, not financial planning (though that is perhaps starting to change).

Whatever you decide on these two discrete areas, it’s hard to see why you and your husband would take different approaches, but I may have missed something.

Investing ethically
On the question of ethical/ESG investing, there are a number of options you could explore and it’s important to understand that different ‘green’ investment approaches vary widely.

Looking at ‘negative screening’ (the exclusion from a fund or portfolio of certain sectors, companies or practices based on specific ethical criteria), as one example, some funds screen out as much at 70% of their listed shares, whereas in contrast others screen out nearer to 20%. What ‘ethical investment’ means and the criteria defining it, can differ a lot between companies.

One of my clients was surprised to find a charity that is invested in an ethical fund but nevertheless holds shares in Shell!

The point being, it’s worth checking the policy of any fund/portfolio you’re considering and seeing if they match your priorities.

For some people, their version of ethical investing is focused on animal testing, others big oil, still others gender balance on the board, it varies widely from person to person. A few of the many managers with offerings in this place you might want to take a look at include Kames Capital and Standard Life Aberdeen, there is some good research online offered by sites such as

A passive vs. active choice is, in principle, no different to whether you want an ESG/ethical screen or not.

Assuming that by ‘active’ you mean ‘stock picking’ - i.e. a manager trying to ‘beat the market’ and/or reduce risk by favouring one share over another (regardless of any ‘automatic ESG screens’ that may or may not apply) - then, simplistically speaking, the active vs. passive choice comes down to whether you believe you can select an active manager who will add more value, than their additional cost.

As for your question about an ethical index, the two most well known and credible ethical investment indices for UK companies are the FTSE4Good and the Dow Jones Sustainability Index (DJSI).

I’m not aware of there being as many passive options in ESG investing though, compared to the wider market, so that might be a consideration.

Good luck on your journey, if you want a helpful guide on your broader financial plan, I recommend One Page Financial Plan by my pal Carl Richards – if you email us at, we’ll send you a free copy.



Answered by

Boring Money