Ethical investing: time to put our money where our mouth is?

Juliet Schooling Latter 24/09/2018 in Sustainable investing

As consumers, we are getting better at minimising our impact on the environment: from cycling or walking instead of driving to recycling as much of our household waste as possible.

Given an incentive, we’ll make even more of an effort: before the 5p charge on plastic bags was introduced in October 2015, each of us was using around 140 a year. Now we use 25* and there has been a 30% drop in single-use bags found in the seas around Britain.

But while we’ve been happy to take action in our everyday lives, when it comes to our investments we’ve been a little slow on the uptake. Although ethical funds have been available for three decades now, of the £1,231 billion invested by UK retail investors, just 1.3% (£16.3 billion) is in ethical funds**.

Time to put our money where our mouth is?

29 September 2018 marks the start of ‘Good Money Week’. The annual campaign is designed to raise awareness of sustainable and ethical options when it comes to your bank, pension, savings and investments.

To mark the occasion, here are our Elite Rated ethical funds: funds that can make a profit without sacrificing your principles:

EdenTree Amity UK

EdenTree are pioneers of ethical investing and offer even the most discerning client a justifiable investment opportunity. Sue Round has been a the helm of the Edentree Amity UK fund for more than three decades and invests in UK small and medium-sized companies. All potential investments must pass a rigorous multi-factor screening process and from those that do, Sue looks for stocks that are currently undervalued and out-of-favour, but with the potential to increase in value.

Rathbone Ethical Bond

This fixed income fund invests in quality investment grade bonds. It has a high income target and its manager, Bryn Jones, excludes a number of companies from the portfolio that are deemed to be unethical: those involved in mining, arms, gambling, pornography, animal testing, nuclear power, alcohol or tobacco. All portfolio holdings must also have at least one positive environmental, social or corporate governance quality.

Standard Life Investments UK Ethical

Manager Lesley Duncan uses a ‘no compromises’ ethical screening to construct a portfolio of best ideas. She is adamant that you can invest without compromising on your values and beliefs – and without compromising on your returns. The fund typically holds between 50–100 holdings, and Lesley will aim to keep them for three to five years, expecting them to grow in value, and also provide some income.

*Source: UK government website and The Guardian, April 2018

**Source: Investment Association, June 2018

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions.Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice.Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.