Ethical funds show resilience during coronavirus pandemic

Ethical investment funds have shown their resilience during the coronavirus pandemic, with the average ethical fund producing a 4.3 per cent return over the past year, compared to an average of 1.5 per cent for non-ethical funds, according to analysis by Moneyfacts.

Moneyfacts believes that the superior investment returns from ethical funds provides a compelling case for them to be considered by all investors, and not just those looking to align their financial decisions to their own values.

The survey examined the performance of ethical funds versus conventional non-ethical funds over a number of investment periods. It also compared ethical funds within the four Investment Association (IA) sectors that contain the most ethical funds (£ Corporate Bond, Global, Mixed Investment 40-85 per cent Shares and UK All Companies).

It found that ethical funds outperformed their conventional rivals in 19 out of the 25 scenarios we analysed, across a range of investment periods.

The performance of some ethical funds, particularly those in the IA Global Sector, has been even more impressive, with the average ethical Global fund up by 14.9 per cent over the last year, easily eclipsing the average return of just 3 per cent from non-ethical Global funds.

While the one-year performance figures highlight the differences, it is over the longer-term that the comparison between ethical and non-ethical funds becomes more meaningful. The Moneyfacts survey shows just how strongly ethical funds are performing over these longer timescales.

Over three years, the average ethical fund has produced growth of 18.4 per cent, more than double the growth produced by the average non-ethical fund (8.5 per cent), while they also hold the advantage over five years with an average return of 41.4 per cent compared with 31.9 per cent from their conventional fund rivals.

Looking back further over 10-year and 15-year results, ethical funds have returned 134.4 per cent and 202.4 per cent respectively, a significant improvement on the average non-ethical fund returns of 103.4 per cent and 155.7 per cent respectively.

Commenting, Moneyfacts head of pensions and investments, Richard Eagling, said: “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.

“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 of our ethical fund performance survey provide further clear evidence to refute it. Indeed, for any serious investor, sustainably-minded or not, the strong performance of ethical funds is now impossible to ignore.”

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