Ethical investments on a different planet

All consciences and financial ambitions are catered for as the funds grow and grow. By Paula Hawkins

Ethical investing used to be a simple business. A decade ago, there were just a handful of funds to choose from, and two basic varieties: light and dark green. The first of these categories was stricter, excluding all companies involved in tobacco, the arms trade, gambling, fur and pornography, as well as any firms abusing workers' rights. Light green funds, meanwhile, tended to screen companies positively, including those with a good social, environmental or ethical track record.

But the "green" universe has become much larger, more popular and a great deal more complex. There are now around 100 ethical investment funds in the UK worth a total of £5.6bn – an increase of 32 per cent in the past year alone, with growth driven by investment returns as well as the burgeoning interest in green issues. Over one and three years, ethical funds have outperformed non-ethical ones, and over 10 years the sector has beaten the FTSE 100 hands down, returning just under 98 per cent compared with the blue-chip index's 43 per cent.

As the sector has grown, it has become less easy to divide funds along simple dark and light green lines. "There is now a far greater diversity," says Philippa Gee at financial advice firm Torquil Clark. Many fund managers now combine the traditional screening approach – whereby firms are excluded or included because of their involvement in given activities – with other strategies. Some adopt a "best in class" approach: they will invest in oil stocks but seek out those companies that are trying to limit the environmental impact of their activities. Others practise "engagement" – encouraging firms to clean up their act.

The policy of fund managers such as Henderson Global Investors, which runs socially responsible investment (SRI) funds, is becoming more common. "First, we seek out the best global groups for providing solutions to climate change," says George Latham at Henderson. Examples include Solar World, a producer of solar-power technology, and Tanfield, a UK company that makes zero-emission vehicles for commercial use. "We also incorporate climate change into our assessment of companies from across the wider UK market," adds Mr Latham. He cites HSBC, a "carbon- neutral bank", and Scottish & Southern Energy, the UK's biggest generator of renewable energy.

HSBC has also been approved as a company for potential investment by the Stewardship funds, the oldest ethical range in the UK, whose approach is traditionally dark green. Tony Stoller helps set the ethical criteria for the funds and says banking has changed: "In recent years, and in large part due to the growing influence of sustainable investment, many leading banks have come to integrate this into their core lending practices."

While F&C Stewardship Income is the fund of choice for ethical investors looking to draw an income from their portfolio, those looking for investment growth could consider Jupiter Ecology. The screening process is rigorous, with initial research being undertaken by a group of environmental and social scientists, and the final selection being made by fund manager Charlie Thomas. "The SRI team is experienced, the process is strong and Charlie Thomas comes across as a passionate green manager," says Graham Frost at financial adviser Bestinvest.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

News
Bill Gates, founder of Microsoft and co-chair of the Bill and Melinda Gates Foundation
businessUber, Snapchat and Facebook founders among those on the 2015 Forbes Billionaire List
News
news... and what your reaction to the creatures above says about you
News
Homer’s equation, in an episode in 1998, comes close to the truth, as revealed 14 years later
science
News
news
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

    Ashdown Group: Trainee Consultant - Surrey / South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    SThree: HR Benefits Manager

    £40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

    Day In a Page

    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
    Yvette Cooper: We can't lose the election. There's too much on the line

    Yvette Cooper: We can't lose the election. There's too much on the line

    The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
    A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

    It's not easy being Green

    After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
    Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

    Gorillas nearly missed

    BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
    Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

    The Downton Abbey effect

    Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
    China's wild panda numbers have increased by 17% since 2003, new census reveals

    China's wild panda numbers on the up

    New census reveals 17% since 2003