A fund is a “pot” made up of multiple companies or organisations, and when you invest, your money is distributed between them. The return you get – or money you lose – is a percentage of the overall profit or loss of the fund. Whereas some companies in the fund might make a financial loss, others might make a gain at the same time, so the risk is spread out between them.

Of course, sometimes companies are impacted by global economic - and sector-specific - factors, so it is worth bearing in mind that investing is generally recommended for the long term (5+ years) to allow time for these economic fluctuations to balance out.

Funds can differ in terms of what investments they hold. Some hold equity (shares) in companies and others hold bonds (debt) which offer fixed returns over a specific time period. Equity funds are generally medium to high risk/return and bonds are lower risk/return.

Here, we’ve run through some introductory questions about funds, to help give a better understanding of how they work. If you are considering investing and are unsure whether a specific product is right for you, then you should seek the advice of an independent financial advisor.

Who decides which companies are included?

It is the job of a fund manager to assess different companies to determine if they’re suitable for the fund. In active fund management (such as at Triodos Investment Management), the fund manager will also maintain an ongoing relationship with the companies and will represent the interest of investors at Annual General Meetings (AGMs). Triodos Investment Management frequently votes for or against measures that will/will not increase the positive impact the company has on the environment and people.

How do they choose?

In terms of traditional investments, a major consideration is the growth rate of a company, the robustness of its business model and the likelihood it will create a good financial return for investors. These points are still important when it comes to impact investing, however the Triodos fund managers also ensure that the company meets the minimum investment criteria and will evaluate how aligned the company is to its seven sustainable transition themes. The themes are based on the UNs Sustainable Development Goals – examples include ‘sustainable food and agriculture’, ‘renewable resources’ and ‘circular economy’.The fund manager will evaluate the make-up of the fund regularly and adjust or add to it to ensure there’s a good balance across sectors and regions.

How do I know what the fund is supporting?

It isn’t always easy to find out which companies are included in a fund, as many investment firms tend to just list the top ten holdings when there is often up to 50 in a fund. This means that people who haven’t asked careful questions might be investing in companies that don’t align with their values. At Triodos, we do things a little differently and publish every company we invest in.

Triodos Investment Management offers three funds to investors in the UK - Triodos Global Equities Impact Fund, Triodos Pioneer Impact Fund and the Triodos Sterling Bond Impact Fund. You can find out more about all of the companies included in the different funds by exploring our interactive map. This tells you exactly why they have been chosen and explains more on the impact they are aiming to deliver.

How can I invest?

People who are new to investing might want to consider investing through a stocks and shares ISA. Within an investment ISA you can invest up to £20,000 per tax year, and there is no capital gains tax and no further tax on income generated. Alternatively, you can invest through an Impact Investment Account. This may be suitable if you have already exhausted your ISA allowance and want to invest more money.