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Good Money Week puts spotlight on ethical funds

Good Money Week puts spotlight on ethical funds

Category: Money
Author: Lieke Braadbaart
Date: 03/10/2018

This week marks Good Money Week, an initiative that seeks to help more people invest and save towards their future in an ethical and responsible way. Its latest figures show that while 85% of British millennials are investing in ethical and socially responsible funds, this percentage declines to 69% of those 55 years or older.

This older group may be missing out, as the latest data from Investment Life & Pensions Moneyfacts reveals that ethical funds have been outperforming non-ethical funds for a while now. In fact, over the last 12 months, ethical funds delivered average growth of 4.97% while non-ethical funds returned 4.05%.

Looking back over the past three years, ethical funds returned 33.28% compared to 32.74% by the non-ethical equivalents, while over five years ethical funds posted an impressive average of 45.47% versus 41.94%. Only going back 10 years gives non-ethical funds the edge, with an average return of 124% outpacing the 119.02% posted by ethical funds – but without the feel-good factor.

Given the clear benefits of investing ethically, it may be disappointing to find it's still only a small part of the wider market. "Despite the fact ethical fund assets under management have more than trebled over the last decade, its share of the overall fund market has only increased from 1.2% to 1.3%," commented Richard Eagling, Editor of Investment Life & Pensions Moneyfacts. "This is contrasted against the growth of other investment types such as tracker funds, which have seen their market share increase from 6% to 13.7% over this period."

While this might make it a bit more difficult to find ethical funds to invest in, the right stocks & shares ISA – with the right fund manager – could help you create an investment portfolio that is ethical and socially responsible as well as lucrative. Just remember that, as with any type of investment, there's always a chance of ending up with less than you start off with.

Women particularly reluctant to invest

The possibility of ending up with less than your investment may be what's been putting off women in particular, with Good Money Week statistics reporting that only 22% of women currently invest in a stocks & shares ISA, while just 18% invest in the stock market outside of an ISA or pension fund.

"A combination of household chores, expenses, and lack of free time means investing is too often put to the back of the queue," said Maike Currie, investment director for Fidelity International. "Women already face a gender pay gap, and are more likely to take time off work for childcare meaning they have less money to save or invest for their future. With longer life expectancies on top of that, investing is no longer a luxury but rather a necessity to ensure a comfortable retirement."

Despite an often-cited fear of risk, 64% of women do say they understand that investing could improve their financial power. "If women invested just an additional 1% of their salary into their workplace pension, we could close the gender pension gap," added Maike, with the current gap standing at 11% according to Fidelity's data.

Clearly, a better understanding of investments and how they could be beneficial – not to mention a positive contributor to the world through ethical choices – is necessary to help both men and women make more informed choices. That's why initiatives such as Good Money Week, which has been going since 2008, are so important.

What next?

For those who are reluctant to dive straight into an investment ISA, there is plenty of information to be found here.

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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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