The Ethical sector is gaining popularity with investors and Funds available cover both equities and fixed interest as well as a number of geographical markets.
Ethical investing combines social and environmental considerations with conventional financial analysis. The screening process may be undertaken in-house by the Fund Manager, by an external consultancy such as EIRIS or a combination of both.
There are two types of strategy:
Since the early focus on avoiding undesirable activities, there has been a notable shift towards investing in businesses that address social and environmental concerns, for example healthcare. Some Funds seek out pioneering businesses in areas such as: renewable energy, low emissions technologies, ‘clean’ infrastructure and sustainable agriculture.
Over the longer term many Ethical Funds have delivered very respectable performance. Some Ethical Funds have a bias towards smaller and mid cap companies and this area of the market has delivered superior returns in recent years.
Dark green Funds tend to exclude entire sectors of the market but this reduced universe occurs with any specialist Fund.
Light green Funds will have a wider universe to choose from and seek to identify trends with potential for higher returns. This may include early stage businesses that carry greater risk.
Pressure on the corporate sector to act more responsibly should increase the number of companies meeting the acceptability criteria. This could also allow greater diversification of risk.
Ethical Funds have different guidelines about what is acceptable and what is not, so it is important to identify one that matches your personal philosophy.
To assist you, below is a shortlist of Funds for your consideration that is carefully selected by our in house research team. They work closely with Morningstar's data to filter down the Fund selection into a focused list of high quality Funds for our investors.
When selecting an Ethical Fund make sure you understand the Fund’s mandate and that it matches your own objectives.
|Fund Name||IA Sector||FMC||Morningstar
(rel to category)
|Kames Ethical Cautious Managed B Acc||Mixed Investment 20-60% Shares||0.9428||High||Buy|
|Royal London Sustainable Leaders Trust C Acc||UK All Companies||0.9500||Average||Buy|
|Standard Life Investments UK Ethical Ret Platform 1 Acc||UK All Companies||1.0319||High||Buy|
|Stewart Investors Worldwide Sustainability B Acc GBP||Global||1.1630||Below average||Buy|