Investing is not only about financial returns. You may also want your money to reflect your personal values, if these relate to the environment, society, ethical principles or faith.
Today, you have a growing number of ways to invest with your values in mind. From ESG and sustainable funds to impact, ethical and faith-based investing, you can choose the approach that best reflects what matters to you.
This guide gives you a simple overview of the main options available, explains how they differ, and highlights some key points to consider when choosing a sustainable investment strategy.
| What are sustainable investments? | They are investments in companies or projects that try to protect the environment, support society, and act responsibly |
| What is ESG? | ESG stands for Environmental, Social and Governance |
| How to invest in sustainable investments? | You can invest in ESG funds, green bonds, or shares of sustainable companies |
| Is it risky? | Yes, all investments involve some risk |
What Are Sustainable Investments?
Sustainable investing allows you to consider more than just financial returns when deciding where to invest your money. It gives you the opportunity to take environmental, social and ethical factors into account alongside your financial goals.
There are different approaches you can choose from, depending on the values and priorities that matter most to you. Here are some things to know.
- Sustainable investments integrate environmental, social and governance (ESG) factors into investment decisions alongside financial considerations.
- Common approaches include ethical investing, impact investing, socially responsible investing (SRI) and green-themed strategies.
- Investors can choose portfolios focused on ESG leaders, companies in the process of transitioning towards sustainability, those pursuing measurable impact, or a combination of these.
- Although sustainable investments are increasingly accessible and competitive, they may not be suitable for every financial objective or risk profile.
- Consulting a regulated financial adviser can help align your values with a long-term investment strategy tailored to your needs.
Example: A UK-based investor seeking to avoid fossil fuels could select a socially responsible fund that excludes oil and gas companies. Another might choose an “improvers” fund focusing on energy utilities actively transitioning to renewables.
Sustainable investing enables you to support the causes you care about — from environmental protection to human rights or faith-based values — without necessarily compromising returns.
What is ESG (Environmental, Social and Governance)
Sustainable investing refers to strategies that aim to generate financial returns whilst also delivering positive outcomes for society and the environment.
| ESG factor | What does it mean? | Examples |
| Environmental | Looks at how a company affects the environment | Climate change, carbon emissions, energy use, waste and biodiversity |
| Social | Looks at how a company treats people and society | Working conditions, human rights, diversity and people’s safety |
| Governance | Looks at how a company is managed and governed | Focuses on structure, organisation, business ethics, transparency and anti-corruption |
Sustainable investing does not mean sacrificing returns; you can still choose investments with long-term growth potential. For instance, a fund manager might sell shares in a company linked to deforestation, even if profitable in the short term, to reduce long-term environmental risk.
By considering environmental, social and governance factors, you can support businesses that focus on issues such as reducing their environmental impact, treating people better and following responsible business practices.
Avoiding Greenwashing
Greenwashing happens when an investment or a company is presented as more sustainable or environmentally friendly than it really is. A company may use words such as “green”, “ESG” or “sustainable”, but these words alone do not tell how the company actually invests.
When choosing an ESG or sustainable fund, look beyond the name and marketing. Ask yourself:
- What does the fund actually invest in? Check its main companies and the sectors it invests in. A fund described as sustainable may still invest in companies with activities that do not match your values.
- What are the fund’s sustainability goals? Look for clear objectives and measurable information, such as carbon emissions, climate targets or other ESG indicators.
- How does the fund select its investments? Read the fund’s investment approach and check if it uses exclusions, ESG ratings, engagement with companies, or other sustainability criteria.
- Can the claims be supported by evidence? Look for regular reports, data and clear explanations of how the fund is progressing towards its sustainability objectives. Independent labels or certifications can also provide additional information.
In 2026, rules in both the EU and UK are placing emphasis on making sustainability claims clear and more closely linked to how funds actually invest. For example, the FCA’s Sustainability Disclosure Requirements (SDR) include rules on sustainability-related names and marketing, as well as an anti-greenwashing rule.
How to Identify High-Quality Sustainable Investments
Not all sustainable investments follow the same principles. They are often categorised by their investment philosophy and sustainability objectives. Here are some examples.
| Category | Description | Example |
| ESG leaders | Invest in companies already strong on ESG metrics | Ørsted is a renewable energy company that completed its transition and now generates 99% of its energy from renewables |
| Transitioning companies (ESG improvers) | Focus on firms improving ESG practices | Unilever has clear sustainability goals and works to reduce its environmental and social impact |
| Impact investments | Aim for measurable social or environmental outcomes | Groupe SOS is a French social enterprise focused on social and environmental challenges, working in areas such as healthcare, social inclusion, education and sustainable development |
| Blended objective strategies | Combine ESG criteria with traditional financial goals | A diversified fund that combines ESG screening with investments across different sectors and regions |
Example scenario: An “impact” fund could support microfinance programmes in emerging markets, while an “ESG leader” fund might hold established clean energy companies.
In the UK, the SDR (Sustainability Disclosure Requirements) will soon label funds to help investors distinguish authentic ESG strategies from those with minimal sustainability focus. Similar standards are already in place in the EU under the SFDR.
Sustainable vs Traditional Investing
Traditional strategies focus primarily on financial return, often ignoring social or environmental consequences. Sustainable investing, by contrast, integrates ethical, environmental and governance factors. This might mean excluding sectors such as fossil fuels or tobacco, or actively engaging with companies to improve their practices.
A sustainable fund, for example, might exclude coal mining but invest in electric vehicle manufacturers to benefit from the long-term growth of clean transport. For instance, an ESG-screened UK equity fund might underweight oil majors like BP and overweight renewable energy developers such as SSE.
While some high-yield sectors may be excluded, sustainable strategies are increasingly competitive and align more closely with long-term economic and regulatory trends.
| Traditional investing | Sustainable investing |
| Mainly focuses on financial returns | Considers financial returns and sustainability factors |
| May invest in any sector, including fossil fuels or tobacco | May exclude certain sectors based on ethical or sustainability criteria |
| Usually focuses on a company’s financial performance | Also considers environmental, social and governance (ESG) factors |
| Does not necessarily consider a company’s social or environmental impact | Looks at how a company affects people, society and the environment |
Common Types of Sustainable Investment
There are several distinct approaches, each with its own philosophy and objectives:
1. Socially Responsible Investing (SRI)
An SRI equity fund uses negative screening to avoid sectors considered harmful (e.g. tobacco, weapons, fossil fuels) thus might exclude all companies involved in tobacco production, arms manufacturing or gambling. For example, it might remove British American Tobacco and BAE Systems from its portfolio, focusing instead on consumer staples and technology companies with cleaner ESG profiles.
For example, the iShares MSCI Europe SRI UCITS ETF applies exclusions to areas including controversial weapons, tobacco, civilian firearms and fossil-fuel extraction.
2. Ethical Investing
Those are investments based on personal or shared moral values (e.g. animal welfare, fair labour). What is considered “ethical” is subjective. One investor may exclude companies conducting animal testing, while another may prioritise climate impact.
An ethical fund might avoid fast fashion retailers linked to labour rights controversies and prioritise brands with Fairtrade or B-Corp certifications. For example, it might underweight companies such as Shein or Primark and increase allocations to Patagonia or other certified ethical brands.
For example, VanEck Sustainable Future of Food UCITS ETF invests in companies helping to make food production more sustainable, from alternative proteins and organic food to precision agriculture and innovative food technologies.
3. ESG Investing
Data-driven investments that use scoring systems for environmental, social and governance performance.
An example of UK-based ESG-integrated global equity fund could overweight Unilever for its high supply chain standards and carbon reduction targets, while underweighting companies with weak governance structures or excessive executive compensation.
4. Impact Investing
This type of investing goes beyond risk analysis and scoring, seeking to generate direct, measurable positive outcomes alongside financial returns.
An impact investment fund could allocate capital to micro-solar grid projects in sub-Saharan Africa, measuring outcomes such as the number of households gaining access to electricity for the first time. Another example could be investing in microfinance institutions such as FINCA to support small business creation.
5. Faith-Based Investing
It aligns portfolios with religious teachings or spiritual values. A Sharia-compliant fund will exclude banks that derive significant income from interest-based lending and companies involved in the alcohol or gambling industry. For example, it could invest in halal-certified pharmaceutical companies or businesses operating in the clean energy sector instead of conventional banks.
6. Green-Themed Strategies
These investments focus specifically on environmental sustainability and target sectors such as clean energy, sustainable agriculture and low-emission transport.
A green bond fund could finance the construction of offshore wind farms in the North Sea or sustainable transport infrastructure such as low-emission rail networks across Europe.
While green investing shares objectives with broader ESG or impact frameworks, it is best understood as a thematic focus rather than a standalone methodology.
For example, the iShares Global Clean Energy Transition UCITS ETF invests in companies involved in clean energy and tracks the S&P Global Clean Energy Transition Index. As of September 2026, it held 106 companies.
Comparison of Common Sustainable Investment Types
| Type | Investment Methodology | Main Focus | Example Sector or Project |
| SRI | Exclusionary screening | Avoiding harmful industries | Tobacco, weapons, fossil fuels |
| Ethical investing | Values-based selection | Alignment with moral beliefs | Animal welfare, fair labour |
| ESG investing | Scoring and integration | Risk management & ESG factors | Companies with high ESG ratings |
| Impact investing | Intentional, outcome-based investments | Measurable social/environmental outcomes | Microfinance, renewable energy |
| Faith-based investing | Exclusion/inclusion aligned with religious values | Alignment with spiritual beliefs | Avoiding alcohol, gambling, high-interest lending |
| Green-themed strategies | Thematic allocation | Environmental sustainability | Clean energy, sustainable agriculture |
Is Sustainable Investing Right for You?
Sustainable investing may be suitable for you if you want your investment choices to reflect your personal values. In special way if you:
- Care about the wider impact of your investments
- Wish to avoid industries you consider harmful
- Value transparency and accountability from the companies you invest in
- Focus on long-term value and responsible risk management
You also have to consider that suistainable funds may have slightly higher fees and that short-term performance can deviate (positively or negatively) from traditional benchmarks.
In the UK, advisers must take account of your sustainability preferences when constructing your portfolio.
Example: if you are opposed to animal testing, you can request funds that exclude pharmaceutical companies engaged in such practices.
How to invest
Now that you have a clearer understanding of the different approaches to sustainable investing, take the time to review your current portfolio and your long-term investment objectives.
Here are the next steps you may wish to consider:
- Explore and evaluate the sustainability options offered by your investment platform (for example, ESG-screened funds, impact-focused portfolios or green-themed investments). If it doesn’t currently offer funds that match your values, you might consider switching provider or discussing custom ESG screens with your adviser.
- Compare these options with your ethical values, financial goals and risk appetite to determine whether any adjustments are appropriate.
- If you are unsure where to begin or would prefer advice tailored to your personal circumstances, seek the support of an independent financial adviser. A regulated professional will be able to help you define your sustainability preferences, explain the potential implications for costs and performance, and develop a long-term investment strategy that reflects both your ethical priorities and your financial objectives.
Moneyfarm can help you find an approach that suits your goals, with access to a wide range of ETFs for building your own investment portfolio.
Frequently Asked Questions
Sustainable investments are investments that consider financial returns only after environmental, social and governance factors and, in some cases, ethical or faith-based values.
Some examples can be ESG funds, renewable energy investments, green bonds and funds that invest in companies working towards positive environmental or social outcomes.
Sustainable investments are financial products that aim to combine financial objectives with environmental, social, ethical or other sustainability considerations. For example, you can choose an ESG ETF, exchange-traded funds that invest in companies selected based on Environmental, Social and Governance criteria.
You can start by identifying the issues that matter to you, checking different sustainable funds or ETFs, and comparing their objectives, costs, risks and investment strategies.
Not necessarily, your choice should depend on your financial goals, risk tolerance, investment timeframe and sustainability preferences. Remember that everyone has different values and priorities: one person may want to avoid fossil fuels, while another may focus on climate change, animal welfare, social impact or faith-based principles.
Yes, sustainable investments can generate financial returns, but their performance can vary and, like all investments, they involve risk.
*As with all investing, financial instruments involve inherent risks, including loss of capital, market fluctuations and liquidity risk. Past performance is no guarantee of future results. It is important to consider your risk tolerance and investment objectives before proceeding.





