Any guidance on investing in sustainable, ethical funds with a proven track record of above average growth?
07 July 2021
Question by Richard
Hi - My wife and I would like to invest longer term in a couple of sustainable, ethical funds with a proven track record of above average growth. Any guidance would be appreciated? Many thanks,
Answered by Rachel Efetha
Thanks for your question. In investing terminology sustainable and ethical mean different things. Sustainable, Socially Responsible Investing (SRI), Environmental, Social & Governance (ESG) or Impact investing all relate to looking at companies that have a positive impact on the world. For instance, do they offset their carbon? Do their suppliers employ child workers in sweat shops? Do they invest in and safeguard their employees? Is the board of directors based on the old boy network or is it a diverse combination based on an individuals skill set?
On the other hand, ethical investing is all about negative screening, so funds do not invest in gambling, pornography, alcohol, tobacco, guns but will invest in anything else.
I am a big fan of SRI, Liontrust and Royal London both have a series of Sustainable funds with different risk ratings and have produced excellent results over all time periods in all markets since launch and often outperform their non SRI peers. When you think about it, we as consumers are becoming more aware of things like carbon offset, palm oil, single use plastic and are making consumer decisions based on this, so it is logical that companies that do act in a socially responsible way will be more profitable.
Chartered Financial Designer
Rachel has nearly 30 years’ experience in Financial Services, with the last 21 years advising clients. She advises on a holistic basis but particularly enjoys Cashflow Planning to see when her clients can afford to retire, and has reduced grown men to tears twice by telling them they could afford to resign right now. As a divorcee herself, Rachel loves coaching women going through divorce to take financial control, and has successfully argued with solicitors to gain her clients a much bigger slice of the pension pie.