Is it Time to Consider Ethical Funds?

Currently, socially responsible investing (SRI) is still a relatively small segment of the overall fund market. However, recent focus on environmental and sustainability issues as well as social justice means that this could be set to increase in the near future.

In a survey recently conducted by MoneyFacts, it is indicated that ethical funds could be set to become more popular, as their performance continues to exceed expectations.

Up-to-date figures show that ethical funds have outperformed their mainstream counterparts, meaning there is scope for more people to consider them for their portfolios.

Looking at the data closely, it shows that ethical funds have had the edge over their traditional counterparts, with an average growth of 16.8% in comparison to 15.2% for the non-ethical fund. For example, looking at the three-best ethical funds EdenTree Amity European (122%), Liontrust Sustainable Future Absolute Growth (115%) and Henderson Global Care Growth (113%), the growth is impressive. Although looking at mainstream funds (83%) which remain ahead of ethical funds (78.8%), there is only a slight difference in margin, the gap is narrowing.

It is a slightly different story when it comes to the Global Sector, which is less flattering for ethical funds. However, thanks to the aforementioned statistics, ethical investing still wins the day.

In response to the findings, Richard Eagling, head of pensions and investments at moneyfacts.co.uk, suggests that “the traditional view that investing ethically entails sacrificing profits looks increasingly outdated.”

It’s not only the performance of ethical funds that you should bear in mind, as investing in sustainable and ethically conscious funds can boast a feel-good factor, giving investors pride in their investments.

Richard adds that “sustainable practices and good governance can give companies a competitive advantage.” Overall, it’s good for investors as well, as through generating strong returns, ethical and SRI funds can also help investors mitigate risk, so it’s a win-win situation.

If you’re interested in investing in ethical funds and need advice, talk to our financial advice team. Please call on 01926 492406 or email us at enquiries@klofinancialservices.com to make an appointment.