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6 best ethical investment funds 2019, picked by the experts

By Mike Narouei, Content Producer at Boring Money

30 May, 2019

You want to choose an ethical investment but come up against a wall of financial acronyms, from SRI to ESG. It’s a pain! So we asked the pros to cut the crap and choose for you.

Finding the right ethical investment option is not easy. To begin with, the industry is fond of its acronyms – ( lines, or would you prefer to follow the UN’s SDGs? Is it sustainable investing you’re after? Impact investing? Green? Amid this alphabet soup, it’s hard to be sure you’re choosing a fund that doesn’t sell gin to small children or exploit badgers for profit. So we’ve asked the pros to choose for you.

6 ethical investment funds picked by the experts

1. Kames Ethical Fund

Picked by Laith Khalaf, Hargreaves Lansdown

- “The fund invests in UK shares, but two thirds of the UK’s biggest companies are excluded on ethical grounds, including tobacco manufacturers, gambling companies, or those that excessively damage the environment. These exclusions mean the fund has a bias to medium and smaller companies, but while that can add to volatility, these companies have the potential to deliver out-sized growth, and are a fertile hunting ground for active managers.”

2. First State Asia Focus Fund

Picked by Laith Khalaf, Hargreaves Lansdown

- “Martin Lau and his team on the First State Asia Focus have a philosophy founded on stewardship, considering environmental, labour, and other governance issues as well as engaging with companies to improve things. They are conservative in the way they run the fund, which has been a rewarding strategy for investors over the long term in a dynamic but also higher risk area of the world.”

3. Impax Environmental Markets Investment Trust

Picked by Moira O-Neill, Interactive Investor

- “While this fund might be considered niche, it is a good satellite fund to add to a more diversified portfolio. With the climate emergency being felt more acutely than ever before, this trust was arguably ahead of the curve, launched over 17 years ago. It aims to help investors grow their wealth by investing in markets that target the cleaner and more efficient delivery of basic services of energy, water and waste. Renewable energy features strongly, as does recycling.”

4. Royal London Sustainable World Fund

Picked by Moira O-Neill, Interactive Investor

- "This invests globally and with a strong ethical policy. Well-known brands feature, and it has a good track record so far. There is absolutely no reason why a broad, diversified ethical approach should compromise your returns, and this fund is, to date at least, a good illustration of that. Another is the J.P. Morgan Emerging Markets investment trust, which has a strong ESG filter – in other words, it has a rigorous ethical policy which investors looking to invest in emerging markets may find comforting.”

5. Kames Ethical Cautious Managed Fund

Picked by Adrian Lowcock, Willis Owen

- “The strict ethical screening dominates the overall positioning of the portfolio. In particular, the equity portion has a small and mid-cap bias, with a relatively high weighting in consumer cyclicals while having little exposure to mining and energy, and excluding tobacco and certain banks. On the fixed-income side, the exclusion of government bonds (gilts) is a significant differentiator.”

Interestingly, Lowcock says the ethical screen removes almost 40% of the FTSE 100 from the managers' investment universe, with a similar level of exclusion on the bond side.

6. SLI UK Ethical Fund

Picked by Adrian Lowcock, Willis Owen

- “This has a strict ethical process, which includes both negative and positive screening, where a number of companies and industries are screened in or out of the stock selection process depending on their impact on the environment or society.
- Exclusions: companies that cause environmental damage, animal testing, genetic engineering, intensive farming, alcohol, gambling, pornography, tobacco and weapons.
- Positive inclusions: environmental technology and pollution control companies, companies that promote equal opportunities, companies that donate to charities or are strongly involved in the community, and companies with good principles of business behaviour and ethics.”