​Ethical and socially responsible SIPPs have gained prominence as investors increasingly seek to align their retirement savings with their values.

A recent survey by the UK Sustainable Investment and Finance Association found that 41% of UK investors have invested or plan to invest in ESG (Environmental, Social, and Governance) funds, highlighting a significant shift towards ethical investing.¹

At EveryInvestor, we delve into the advantages, potential drawbacks, and key considerations of ethical SIPPs, aiming to provide you with comprehensive insights to determine if this investment approach aligns with your retirement objectives.

Let's explore integrating responsible investments into your SIPPs...

What Is an Ethical or Socially Responsible Investment (SRI) SIPP?

An ethical or socially responsible SIPP is a pension wrapper that allows you to invest in funds, shares, and other assets screened for ESG criteria. These SIPPs avoid sectors like tobacco, fossil fuels, and arms, and instead focus on companies with strong sustainability, social responsibility, and governance practices. Investors can tailor their portfolios to support clean energy, fair labour, diversity, and transparent management.

For a practical checklist on SIPP setup and requirements, see the SIPP Requirements Checklist.

What Should I Know About Ethical & Socially Responsible Investment Funds?

Ethical and socially responsible investment (SRI) funds are a type of SIPP that aim to generate both financial returns and positive social or environmental impacts, aligning your retirement savings with your values.

These funds typically avoid investments in industries associated with conventionally negative impacts, such as tobacco, weapons, or those contributing to deforestation.

Investing in ethical funds ensures that your capital supports businesses working towards a sustainable and socially responsible future, offering a way to secure financial growth while making a positive contribution to society.

Why Are Ethical/SRI SIPPs Becoming More Popular?

Ethical, SRI SIPPs, and other ‘green’ investment platforms are becoming more popular due to a combination of factors that include governement support and shifts in ivestor preferences.

These are some of the mian reasons:

• Addressing global challenges: Investors are increasingly recognising that their capital can be a powerful force for positive change, helping to tackle social and environmental issues such as poverty, inequality, education, and healthcare. 
• Changing investor preferences: Many investors are prioritising social and environmental causes and seek to align their investments with their ethical beliefs and values. 
• Corporate adoption of ESG principles: Big businesses are adopting environmental, social, and governance (ESG) principles² to improve their long-term sustainability and mitigate risks.
• Increased awareness and education: Investors are realising that they do not have to sacrifice profits for social or environmental good and that responsible investing can be both financially rewarding and socially impactful.
• Government support: Policy measures, such as the Green Finance Strategy,³ along with incentives and regulations, can play a crucial role in stimulating the expansion of ethical investing.

Why Choose an Ethical SIPP in 2025?

The demand for ethical investing is surging, with 41% of UK investors now allocating funds to ESG products. This shift is driven by:

• Growing awareness of climate change, social justice, and corporate responsibility.
• Government support for green finance and new sustainability reporting standards.
• Evidence that well-managed ESG funds can match or outperform traditional investments over the long term.

Ethical SIPPs allow you to align your pension with your principles, support positive change, and potentially benefit from the resilience of companies with strong ESG credentials.

How to Identify a Truly Ethical SIPP

Not all “ethical” funds are created equal. To ensure your SIPP aligns with your values:

• Check ESG Screening: Look for funds that use robust, transparent ESG criteria, excluding harmful sectors and prioritising sustainability.
• Review Fund Holdings: Examine the underlying companies and their track records on environmental and social issues.
• Assess Governance: Strong governance means transparent reporting, diverse leadership, and clear anti-corruption policies.
• Beware of Greenwashing: Some funds may overstate their ethical credentials. Look for FCA-regulated products and independent ESG ratings.

Best Ethical & Socially Responsible SIPPs for 2025: Top 5 Pension Options

For seniors seeking ethical and socially responsible SIPPS, our best recommendations include Hargreaves Lansdown’s SIPP, Fidelity's SIPP, and AJ Bell Youinvest.

These SIPPs not only offer robust investment options but also are committed to responsible investment principles.

​Here are the providers that align with these values:​

1. Hargreaves Lansdown's SIPP: Ethical Investment Options offers a dedicated portfolio for ethical investments, focusing on companies committed to social and environmental responsibility.
2. Fidelity's SIPP: Extensive Ethical Funds provides a wide range of ethical funds, enabling investors to tailor their portfolios according to personal values. ​
3. AJ Bell Youinvest: Diverse Socially Responsible Funds grants access to a variety of socially responsible funds, allowing for a customized ethical investment strategy. ​
4. Interactive Investor (ii) Ethical SIPP: Rated Sustainable Investments features the UK's first-rated list of sustainable investments, assisting investors in building a portfolio that aligns with their ethical standards. ​
5. Simply Ethical Pension: Sharia-Compliant and Ethical Investments specialises in ethical and Sharia-compliant investment portfolios, catering to investors seeking faith-based or ethical investment options. ​

Benefits and Risks of Ethical SIPPs: Is Responsible Investing Right for You?

The benefits of ethical SIPPs include the opportunity to invest in a portfolio that aligns with personal values; however, the risks include limited investment options compared to traditional SIPPs and the possibility of lower financial returns, as some ethical investments may carry higher risk or lower liquidity.

Here are the pros and cons:

What Are the Benefits of Ethical SIPPs?

The benefits of ethical SIPPs include values alignment, positive impact, and long-term returns.

Here's more on these benefits: 

• Values alignment: They make it possible for you to stay true to your beliefs, fostering a sense of purpose and meaning in your financial journey.
• Positive impact: By investing in socially responsible ventures, you actively support businesses contributing to a better world, and promoting societal and environmental progress.
• Long-term returns: Ethical investments demonstrate resilience over time,⁴ as companies focused on sustainability and sound governance often perform well amidst market fluctuations.

What Are the Risks of Ethical SIPPs?

The risks of ethical SIPPs include greenwashing, misaligning values, and increasing your investment risk by screening out certain sectors.

Here's more on these risks: 

• Greenwashing: This is when companies paint a positive, but false, image of their environmental efforts to attract ethical investors.⁵ This deceptive practice can undermine the true impact of Ethical SIPPs.
• Subjectivity: No industry benchmark for defining an 'ethical' investment exists. You or your fund manager may have different definitions of what this means, so research is needed to ensure a business or fund's ethical values align with your own.
• Lack of diversification: Having a diversified portfolio of investment funds is one of the fundamentals of minimising investment risk. By being too rigorous in applying your principles, your portfolio may be more limited than those that take a more conventional approach.⁶

Ethical SIPPs vs. Traditional SIPPs—Which Is Right for You?

Choosing between an ethical and a traditional SIPP depends on your priorities:

• Ethical SIPPs: Best for those who want to drive positive change, accept potential short-term volatility, and are willing to research fund credentials.
• Traditional SIPPs: May offer broader diversification and lower fees, but lack ESG screening.

If you want to combine both, many providers allow you to blend ethical and conventional funds within a single SIPP.

What to Consider Before Choosing an Ethical or Socially Responsible SIPP

When choosing ethical SIPPs, the key considerations largely mirror those for any other SIPP, with the added dimension of aligning investments with your values.

These include:

• Types of investments: You can invest in stocks and shares, listed investment trusts, bonds, exchanged traded funds, and commercial property among others. With an ethical or SRI SIPP, you just have to make sure your investments align with your values.
• Tax benefits: The same tax benefits apply as with a traditional SIPP - tax relief on contributions, tax-free growth on investments, and a 25% tax-free lump sum on retirement.
• Fees and charges: Costs associated with these SIPPs could be higher as more research has gone into sourcing investments that meet your ethical criteria.

How to Build an Ethical SIPP Portfolio: Step-by-Step for 2025

Compiling such a SIPP involves several steps to align your investments with your values, and these include understanding your values and diversifying your investments.

Let’s see how you can create such a pension portfolio:

What to Consider When Choosing Ethical or Socially Responsible SIPP Options

When choosing these SIPP options, evaluate available investments that align with your well-defined values and maintain a diversified portfolio to effectively mitigate risk.

If you’re unsure where to start, seek expert advice to ensure your portfolio aligns with ethical principles while achieving your financial goals.

Considerations include:

• Investment approach: Understand the best SIPP choice of investment options and assess its compatibility with your values and risk tolerance.
• Define your values: Clarify your core values and prioritise ethical and social issues when selecting investments.
• Diversify your portfolio: Build a diverse portfolio, investing in various industries and asset classes that align with your ethical criteria.
• Seek expert advice: If you’re unsure where to begin or require guidance, consult a financial advisor well-versed in ethical investments.

Ethical Investment Option Ideas

Exploring ethical investment options unveils innovative opportunities for investors to champion sustainable initiatives, advance social welfare, and make a positive impact on the world, all while pursuing financial growth.

For example:*

• The AJ Bell Responsible Growth Fund is a portfolio of companies with strong ESG credentials.
• Fidelity offers a Sustainable Investment Finder service.
• Hargreaves Lansdown includes the Responsible Investment Fund as an investment option.

*These examples are for illustrative purposes only and don’t constitute financial advice.

Beyond SIPPs: Other Green and Ethical Investment Opportunities in 2025

Beyond ethical SIPPs, there are various socially responsible investment options, such as Socially Responsible Mutual Funds, Green Bonds, and Community Investment Funds. 

Each option offers different risk levels and returns, enabling you to tailor your portfolio to align with your unique preferences and objectives.

Common Questions

In Conclusion

Ethical and socially responsible SIPPs offer investors a pathway to grow their retirement savings while making a tangible, positive impact on society and the environment. 

However, navigating potential risks, such as greenwashing and subjective ethical criteria, is vital to ensure the credibility and authenticity of these investments. 

By diligently researching and selecting true ethical or socially responsible SIPPs, you can make responsible investment choices that contribute to a more sustainable and equitable future.