Ethical investing | moneyfacts.co.uk

Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 02/10/2020

At a glance

  • Ethical investing is choosing investments that deliver social and environmental benefits
    Ethical investment funds select ethical investments based on a set of ethical principles or rules
  • Investment platforms include lists of ethical investment funds

What is ethical investing?

Ethical investing is when individual investors choose the assets and stocks, they will invest in based on their own ethical values and beliefs. This can range from excluding specific firms that operate in areas such as gambling, tobacco, adult entertainment, weapons or alcohol or by selecting funds that the consider a range of ethical factors and/or delivers positive ethical outcomes. Positive ethical outcomes can include social and environmental benefits.

How to invest ethically?

Investors can choose their own investments, selecting stock in individual firms based on analysis of their ethical credentials. However, this is time consuming and requires regular research to help make sure your choices remain relevant and offer a good return. A suitable investment fund includes a range of ethical investments based on a set of guiding principles or rules for managing the fund.
Investors can use an investment platform to choose, invest in and manage their ethical investments. Interactive investor is an investment platform that lists ethical funds based on the principles; avoids, considers and embraces.
Avoids means the investment fund will exclude any ‘sin’ stocks such as firms dealing in alcohol, tobacco, firearms and gambling. Funds that use a ‘consider’ strategy try to balance the potential harmful and positive factors across a range of funds. For example, some funds may choose to allow a maximum percentage of their investments in ‘sin’ stocks. Those funds that ‘embrace’ ethical principles will exclude anything that does not meet their ethical rules and will actively pursue investments in those firms that generate positive ethical benefits.

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What are the best ethical investments in 2020?

 

Here are the best performing funds based on the return generated from a £1,000 investment made over one-year. Always remember that past performance may not be repeated in the future.

Rank

Fund

Value of £1,000 lump sum over one year (no charges applied)

Growth %

1

Baillie Gifford Positive Change Account

£1725

71.60%

2

Baillie Gifford Global Stewardship B Account

£1604

 

3

FP Carmignac Emerging Markets GBP Class A Account

£1398

37.00%

4

Liontrust SFA Absolute Growth 2 Account

£1250

25.00%

5

Liontrust SFA Growth 2 Account

£1263

24.10%

Source: Lipper/Moneyfacts Investment Life and Pensions Magazine

Note: the table above is ordered by the best performance 1 October 2020 over the past 12 months.

The Billie Gifford Positive Change Account is a global fund that aims to address issues in education, social inclusion, healthcare and environment. Investment is made in the shares of companies of any size, any country and any sector. The fund investment manager will only invest in those companies shown to have a positive ethical impact.

The Baillie Gifford Global Stewardship Account invests in the shares of companies that in the view of the investment manager behave in the interests of all stakeholders. This includes environmental and social issues and corporate culture. 
The FP Carmignac Emerging Markets GBP Class A Account has a socially responsible investment approach focussed on emerging markets.
All investments made in the The Liontrust SFA Absolute Growth 2 Account and Growth 2 Account will be within each fund’s acceptable social and environmental criteria. Both can invest in global assets and are flexible with potential investments in securities, money market instruments, investment schemes, deposits and derivatives and forward transactions.

Why invest ethically?

Making a choice to invest ethically is not only good for wider society and the environment but ethical investments have been shown to outperform the returns of their non-ethical equivalents. In July 2020 Moneyfacts revealed that 140 ethical unit trusts had grown by 4% in the 12-months to 1 July 2020 compared to a contraction of 1.5% for those not in the ethical category.

 

The value of investments can go up as well as down, and investors’ capital is at risk.

Investors should check all fees with their financial adviser, investment platform or provider before making any investment.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

At a glance

  • Ethical investing is choosing investments that deliver social and environmental benefits
    Ethical investment funds select ethical investments based on a set of ethical principles or rules
  • Investment platforms include lists of ethical investment funds

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