Why 'moral' investing is a broad church
Sam Dunn asks how much profit you will sacrifice on the altar of an ethical stance
Sunday 25 April 2004
Belief in God is good for your wealth as well as your soul. So says the Ave Maria fund, a US investment firm whose morally conservative stance for its savers is to shun any company that it says breaks the Catholic Church's core teachings.
Its views are resolutely right wing. It screens out publicly listed US companies that offer work benefits to non-married partners (whether same or opposite sex), support the contraception industry or have commercial links to abortion or pornography.
This stance has served it well so far, says Ave Maria investment manager Bob Schwartz. "People coming to our funds are looking for the moral high ground, to have their faith and investments on the same level. In the past three years, our fund has risen by 35 per cent, compared with a 5 per cent fall in the S&P 500 [a US stock market index]."
The fund has some 2,500 investors - not just Catholics. Two of its top stocks this January were Harley-Davidson, the Hells Angels' favourite motorcycle-maker, and oil giant Exxon-Mobil. It has blacklisted more than 400 companies, including Sears Roebuck, the department store, after it began offering staff partner benefits to unmarried employees last year.
Plenty of other funds are taking a moral stance - or not, as the case may be. At one end of the spectrum are those that back "green" companies engaged in protecting the environment, and at the other are those that invest in "sin" sectors such as tobacco, alcohol and gambling.
One successful "vice" fund was launched in the US in 2002 and prompted Willis Owen, a UK investment management company, to announce plans for a similar venture last year.
Although its launch has been postponed, spokeswoman Kerry Nelson says shares in such a fund will always be in demand "regardless of any economic climate" because of the products' addictive nature. For example, tobacco stocks such as BAT and Imperial have long boosted investment funds thanks to robust performance throughout stock market volatility.
This highlights a dilemma for ethical investors: do your beliefs mean you have to sacrifice performance?
"Green" ethical funds in the UK - those avoiding companies that harm the environment or damage people's health - have been dogged by accusations of weak performance. As in all sectors, you will find funds that "shoot the lights out" and others that crawl along the floor, but there is a particular price to pay for avoiding financially successful stocks on moral grounds, says Meera Patel, a senior analyst at independent financial adviser (IFA) Hargreaves Lansdown.
"Ethical investors have to be prepared for performance that isn't going to match investing across the whole of the market," she warns. "You limit yourself because 'being green' does sieve out potentially good-performing companies. Being green and ecologically minded can be more costly for you."
The performance of ethical funds in the UK is "uninspiring" she says, with one exception; Isis Stewardship.
Overall, though, figures from S&P reveal that ethical and ecological funds have not been woeful underachievers. Over the three years ending 19 April 2004, the average sector fund shrank by 17.3 per cent compared with a smaller 13.3 per cent slump in the UK All Companies index and 17.1 per cent in the Far East excluding Japan.
Over the past year, the average ethical fund is up 18.3 per cent, against 37 per cent for the Far East ex Japan and 22.9 per cent in the UK All Companies index.
Scott McAusland, a spokesman for the Ethical Investment Research Service (Eiris), says: "We are happy there are funds that can provide decent returns, although during the last couple of years, for example, military stocks have done really well and most ethical funds won't touch them. But [performance] is not the main reason for people to [buy into these funds]; they do so for their principles."
With some £4.2bn currently under management in ethical UK funds - the highest level since early 2001 - Eiris says moral investing is growing in popularity. Its view is echoed by Amanda Davidson, a partner at IFA Charcol Holden Meehan: "If your principles are important to you, you should invest in just ethical funds. There is enough choice out there."
Alternatively, she says, "if you are not that bothered, just go for the 'all out' [performance] funds and give the cheque to charity."
Ms Davidson concedes that the limited range of companies means "you may miss out on some performance", but she stresses that it can work both ways. For example, your returns might have rocketed if an ethical fund manager had been an early investor in wind power companies, which have benefited from the Government's commitment to clean energy.
If you are interested in getting some ethical, or even "unethical", investments into your portfolio, the websites listed below are a good place to start. Alternatively, contact an IFA, who will be able to explain the difference between the funds available. These range from "dark green" - investing in companies that actively pursue environmentally friendly policies - to "light green" - businesses that simply avoid damaging the environment.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
Shock poll shows voters believe Ukip is to the left of the Tories
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
New era of cheap oil 'will destroy green revolution'
Ukip founder Alan Sked and Nigel Farage 'begged Enoch Powell to stand as a candidate'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
iJobs Money & Business
£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...
£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...
$125 - $175 per annum: Carlton Senior Appointments: Senior Wealth Manager In...
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
Day In a Page
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens