What Are The Best Ethical Funds In 2021? | moneyfacts.co.uk

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Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 02/03/2020

Ethical investing explained

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 consider a range of ethical factors and/or deliver positive ethical outcomes. These positive ethical outcomes can include social and environmental benefits, and there’s been a clear focus on sustainability in recent years, with many investment firms offering funds that highlight their green credentials.

How to invest ethically

Investors can choose their own investments, selecting stock in individual firms based on analysis of their ethical considerations. However, this is time-consuming and requires regular research to help make sure your choices remain relevant and offer a good return. Instead, you can opt for a suitable investment fund that aligns with your ethical ideals. These funds will include a range of ethical investments and are based on a set of guiding principles or rules for managing the fund, and you can see which perform best by keeping an eye on our ratings.

Why invest ethically?

Making a choice to invest ethically is not only good for wider society and the environment, but it can be good for your portfolio, too, as 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.

How do we decide which ethical funds get the best rating?

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 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 that we examine are expanded on in the ‘What elements of ethical funds do we look at?’ section below.

How does a star rating help me find the best ethical funds?

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

What elements of ethical funds do we look at?

A wide range 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
  • The level of involvement with the investing companies
  • 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.

 

Only the very best funds meet our strict criteria; you can see which have been awarded a four and five-star rating below. And, if you’re more concerned with performance levels on a rolling basis, read on to find the best-performing ethical investments each month.

Ethical Funds - Five Stars

  • 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

Ethical Funds - Four Stars

  • 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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What are the best ethical investments in July 2021?

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

Castlefield BEST Sustainability UK Small Comps

£1,547

55%

2

Baillie Gifford Positive Change Account

£1,494

49%

3

FP Carmignac Emerging Markets GBP Class A Account

£1,468

47%

4

Stewart Inv Indian Subcontinent Sustainability Account

£1,464

46%

5 Ninety One Global Environment Fd R Account GBP £1,447 45%

 

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

Castlefield B.E.S.T Sustainable Smaller Companies. This fund aims to achieve long-term growth and is investing in a range of sectors including software and computer services, investment banking, medical equipment and pharmaceuticals. 

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

Stewart Inv Indian Subcontinent Sustainability Account focuses on the Indian sub-continent and is managed by Sashi Reddy and David Gait. The fund has 16% invested in software and computer services, 10% in personal care and grocery stores and 9% in finance and credit.

Ninety One Global Environment Fd R Account GBP. This fund invests at least two-thirds into shares of companies that are involved in processes to reduce carbon dioxide emissions.

 

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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.

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