The latest research by Moneyfacts.co.uk reveals that ethical funds are performing remarkably well in the current economic climate, proving that investors can stick to their principles and still enjoy healthy investment returns.
The average ethical fund has posted gains of 24% over the last year, compared with 18% growth from the average non-ethical fund.
Ethical funds have also outperformed non-ethical funds over three years, with the average ethical fund up 36% compared with 31% for the average non-ethical fund.
At first glance, the ten-year performance figures are less flattering for ethical funds, with the average ethical fund growing by just 56%, less than half the growth of the average non-ethical fund (128%).
But these figures are distorted by the fact that sectors such as China/Greater China and Global Emerging Markets, which have experienced extraordinary growth, do not house any ethical funds with a ten-year record.
"Ethical funds have clearly benefitted from their lack of exposure to 'unethical sectors' such as mining, oil and gas and tobacco, which have been amongst some of the poorer performing areas of the market over the last twelve months," said Richard Eagling, Head of Investments & Pensions at Moneyfacts.co.uk.
Ethical funds avoid investing in certain industries, such as tobacco, nuclear power, animal testing or the arms trade. They also invest in those companies making a positive impact, such as renewable energy, sustainable timber and waste management.
According to figures from the non-profit sustainable investment research firm EIRIS, £11 billion is currently invested in UK green and ethical funds; a significant improvement on the £4 billion 10 years ago and far surpassing predictions made by some commentators at the time of the launch of the first UK ethical unit trust that the ethical market would reach no more than £500 million.
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