What are the best ethical funds in 2021?

Every 12 months, the Moneyfacts product specialists take an in-depth look over the ethical funds sector to determine which are judged worthy of our coveted four- and five-star annual Star Ratings. Many different elements are carefully weighed and judged in comparison with the other products currently available to determine which ethical funds are truly leaders in their class when it comes to the benefits they provide to consumers.

The Moneyfacts Star Ratings are an impartial and highly respected overview of many categories of financial products, valued by professionals, providers and consumers alike. The features and benefits of each ethical fund products that we closely examine are expanded on in the ‘What elements of ethical funds do we look at?’ section below.

Moneyfacts Star Ratings are both independent and impartial – meaning we can provide consumers with an expert analysis for the whole market – so you can have confidence that the ethical funds we score highly really are among the best that can be found.

A considerable number of features are considered in the final star rating awarded to an ethical fund product. These include:

• Flexibility of investment amount
• Initial entry charges
• Ongoing charges
• Linked products available
• In addition, the level of involvement with the investing companies is considered
• The avoidance of negative investing, including that which benefits from animal testing, armaments, environmental damage and oppressive regimes
• The support of positive investment, incorporating employee welfare/rights, packaging reduction and sustainable forestry.

• ASI Ethical Corporate Bond Fund
• ASI Europe ex UK Ethical Equity Fund
• ASI UK Ethical Equity Fund
• BMO Responsible Global Equity Fund
• BMO Responsible Sterling Bond
• BMO Responsible UK Equity Growth Fund
• BMO Responsible UK Income Fund
• EdenTree Responsible & Sustainable European Equity Fund
• EdenTree Responsible & Sustainable Global Equity Fund
• EdenTree Responsible & Sustainable Sterling Bond Fund
• EdenTree Responsible & Sustainable UK Equity Fund
• Janus Henderson Global Sustainable Equity
• Janus Henderson Institutional Global Responsible Managed
• Janus Henderson UK Responsible Income
• Jupiter Ecology
• Liontrust Sustainable Future Cautious Managed Fund
• Liontrust Sustainable Future Corporate Bond Fund
• Liontrust Sustainable Future Defensive Managed Fund
• Liontrust Sustainable Future European Growth Fund
• Liontrust Sustainable Future Global Growth Fund
• Liontrust Sustainable Future Managed Fund
• Liontrust Sustainable Future Managed Growth Fund
• Liontrust Sustainable Future UK Growth Fund
• Liontrust UK Ethical Fund
• Premier Miton Ethical Fund

• Aegon Ethical Cautious Managed OEIC
• Aegon Ethical Corporate Bond Fund OEIC
• Aegon Ethical Equity Fund OEIC
• BMO Sustainable Universal MAP Balanced C Acc Fund
• BMO Sustainable Universal MAP Cautious C Acc Fund
• BMO Sustainable Universal MAP Growth C Acc Fund
• Jupiter Responsible Income
• Rathbone Ethical Bond Fund
• Royal London Sustainable Managed Income
• Royal London Sustainable Managed Growth
• 7IM Sustainable Balance

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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.

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.

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.

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.

^{Source: Lipper/Moneyfacts Investment Life and Pensions Magazine. Note: the table above is ordered by the best performance 1 May 2021 over the past 12 months.}

The FP Carmignac Emerging Markets GBP Class A Account has a socially responsible investment approach focussed on emerging markets.

The Baillie 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 Investec Global Environment Account GBP is a global fund with nearly 30% of its investments in the United States. This is followed by emerging markets in Asia at nearly 22%. Some of the main holdings in this fund include Vesta Wind Systems, Waste Management Inc and Nextera Energy Inc. The fund manger is Deidre Cooper at Ninety One Fund Managers UK Limited.

Baring Eastern Trust GBP Acc is a fund focussing on Japan and the Asia Pacific reason. The fund invests in a range of sectors, with 22% in technology hardware and 20% in computer software. The remainder is across a number of sectors including industrial, travel, chemicals and banks.