For those investors concerned about where their money is being invested, Environmental, Social and Governance (ESG) funds could be the answer. These funds screen companies in line with the fund’s ethical and socially responsible objectives and include or exclude companies based on their values.
ESG funds tend to be actively managed, making them attractive not only for their ethical credentials but for their returns – indeed, ethical investing no longer needs to be the poor performing relation of traditional equity funds.
The balance between profitability and ethics
At Murdoch Asset Management, we apply the same stringent selection criteria to ESG funds as we do to our main portfolios, seeking above average returns and aiming to strike a balance between profit and what is better for society. It is worth noting, however, that some ethical and socially responsible investment (SRI) funds perform better than others. For example, the best Ethical UK fund saw a healthy growth of 92.5% over 5 years to 30th July. This meant that £10,000 grew to £19,253 compared to a return of £12,011 for the worst performing ethical fund. These compare to 30% growth – to £13,060 – of the FTSE all share index in the same period.
Not all ethical investment funds are the same
It is unwise to buy investments based on past performance – it isn’t a guide to future performance; fund managers take very different investment approaches, and the capital value of investments and the income generated can fall as well as rise. Expert advice should always be sought to best match your investment goals and needs, your tolerance for loss in the short term – understanding the real risks involved – and choose appropriate investments.
International Investment spotlight on ESG and sustainability
Austen Robilliard, our Investment Director, is responsible for the research, analysis and management of our investment portfolios and features as panellist on the International Investment Spotlight on ESG and Sustainability.
Whilst another series is anticipated in the coming months, the latest Spotlight Q&A session, held in March 2021, can be viewed right. Topics covered include the impact that investing in the social side of the ESG spectrum can have in the real world and how a year in lockdown has accelerated the acceptance of ESG in mainstream investing.
The first of the spotlight series, recorded November 2020, covers the impact of the Covid pandemic on ESG funding, the outlook and future predictions for ethical investing, followed by a discussion about key drivers that should be implemented to ensure proper ESG regulation and transparency for the ethical investment market. You can watch the recording by clicking on the image to the right.
For more information, please download our Ethical Investing brochure here