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Ethical investors have been rewarded

Ethical investors have been rewarded

Category: Investments

Updated: 19/10/2015
First Published: 19/10/2015

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

To mark the start of Good Money Week, Investment Life & Pensions Moneyfacts has analysed the market and found that those who invested ethically during last year's Good Money Week (19-25 October 2014) have been rewarded for their decision to do so, with the potential returns generated far outweighing those that could have been achieved from non-ethical investments.

Ethics pay off

The figures show that the average ethical/SRI fund has returned 8.2% over the last year, compared with returns of 6.8% from the average non-ethical fund, a trend that can also be seen on a three-year and five-year basis (see the table below). In fact, it's only on a 10-year basis where non-ethical funds performed slightly more favourably.

Ethical funds versus non-ethical funds (percentage growth)

Since last year's Good Money Week (19 October 2014) 3 years 5 years 10 years
All ethical funds 8.2% 30.36% 39.79% 78.08%
All non-ethical funds 6.8% 24.21% 34.22% 82.90%
IA sector performances
Ethical £ Corporate Bond funds 2.89% 14.46% 29.76% 50.26%
Non-ethical £ Corporate Bond funds 2.03% 11.75% 26.82% 50.08%
Ethical Mixed Investment 40-85% funds 9.76% 35.79% 51.92% 83.29%
Non-Ethical Mixed Investment 40-85% funds 7.51% 23.00% 31.29% 74.97%
Ethical Global funds 5.77% 29.63% 31.98% 78.02%
Non-ethical Global funds 9.78% 35.05% 44.31% 89.82%
Ethical UK All Companies funds 12.81% 39.38% 60.99% 81.19%
Non-ethical UK All Companies funds 11.24% 35.72% 50.14% 98.85%


Source:
Moneyfacts/Lipper Investment Management. % Growth as at 15 October 2015, total return, UK net, no initial charges.

The generally stronger performance of ethical funds also applies to three of the four Investment Association sectors that contain the most ethical funds (£ Corporate Bond, Mixed Investment 40-85% Shares and UK All Companies), where ethical funds have produced superior returns to traditional funds over the last year. The only exception is the Global sector, where ethical funds have typically lagged behind their conventional counterparts. Nonetheless, ethical/SRI funds have continued to perform favourably on a broader basis, outpacing the returns generated by their traditional fund rivals in 14 out of the 20 (70%) different investment scenarios surveyed.

Richard Eagling, head of Pensions and Investments at Moneyfacts, commented: "Ethical funds have enjoyed a productive 12-month period, and it's encouraging that those who followed their conscience during last year's Good Money Week have reaped the rewards. A renewed focus on climate change and the strong performance of ethical funds will hopefully encourage more investors to grasp the opportunities offered by the ethical fund sector."

Time to invest?

If you're new to the world of investment, it looks as though ethical funds could be a great place to dip your toe in the water. However, it'll require careful thought and probably a bit of advice, too, as investing isn't something you can jump into unprepared.

Rather than going straight into stock market investment, you may want to consider testing the water with a slightly less daunting stocks & shares ISA first: although there are still risks involved, most funds will be under the watchful eye of a dedicated fund manager, so there'll be less action required on your part. Make sure to get suitable advice to decide if this form of investment is right for you, and start the process by seeing what stocks & shares ISAs are available.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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