Ethical investment funds outperform non-ethical rivals

Ethical investment funds have outperformed their non-ethical counterparts over the last year during the coronavirus crisis, new research by Moneyfacts has uncovered.

The findings show that the average ethical fund has produced returns of 4.3% over the last year, compared with an average loss of 1.5% generated by their non-ethical rivals.

The performance of some ethical funds is even more impressive, with the average ethical global fund up by 14.9% over the last year, easily eclipsing the 3% growth rate of non-ethical global funds.

Moneyfacts said that the superior investment returns of ethical funds should make them attractive to all investors, and not just those that are looking to align their financial decisions with their own values.

“For any serious investor, sustainably-minded or not, the strong performance of ethical funds is now impossible to ignore,“ said Richard Eagling, head of pensions and investments at Moneyfacts.

“The argument that investing responsibly must mean a trade-off between value and values or profits and principles has been increasingly debunked in recent years and the latest results provide further clear evidence to refute it.“

Moneyfacts examined the performance of ethical funds versus conventional non-ethical funds, and also compared ethical funds within the four Investment Association sectors that contain the most ethical funds (£ Corporate Bond, Global, Mixed Investment 40-85% Shares and UK All Companies).

The figures show that ethical funds outperformed their conventional rivals in 19 out of the 25 scenarios analysed across a range of investment periods.

Over three years, the average ethical fund has produced growth of 18.4%, more than double the 8.5% of growth generated by the average non-ethical fund.

For the 10-year and 15-year results, ethical funds have returned 134.4% and 202.4% respectively, a significant improvement on the average non-ethical fund returns of 103.4% and 155.7% respectively.

“The momentum behind responsible investing has been steadily building for some time, but there is a sense that a raft of new initiatives, changing regulation and some truly impressive sustainable fund performances could prove a catalyst for further growth,“ Eagling added.

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