PEPS: Money and morals can mix

Ethical PEPs allow you to align principles with profit, says Tony Lyons

If you are an investor with a conscience wanting to take maximum advantage of the tax benefits available, consider in-vesting in an ethical PEP or ISA. You should make money over the long term without going against your principles.

An ethical fund is a unit or investment trust run so that it only invests in companies meeting the fund's specific criteria, usually set out in a mission statement. These vary from fund to fund but there are some common areas. For example, nearly all funds avoid companies involved in the arms trade or the tobacco industry.

Most of the funds making up the ethical investment sector fully qualify for inclusion in a PEP. So you can invest up to the full pounds 6,000 PEP allowance before the end of the tax year.

"During the past couple of years a handful of big companies have been outperforming the rest of the market," says David Mott of CIS Unit Managers, which runs the CIS Environ fund. "Many of them are barred to us. Although we take a pragmatic approach, and some ethical funds have more relaxed criteria than others, we do find we are largely invested in small and medium-sized companies - sectors that have lagged behind. But for those ethical funds that have been around for some time, the average performance has been the same as for other unit trusts."

There are 28 ethical unit trusts and two investment trusts - the latter from Friends Provident and Jupiter - controlling funds valued at almost pounds 2bn. In the UK the major impetus for ethical investment was supplied by the anti-apartheid movement in the 1980s. The Friends Provident Stewardship fund was launched in 1984, the year after the Ethical Investment Research Service (Eiris) was founded by a group of churches and charities to provide research into corporate behaviour.

Today Eiris advises many of the ethical funds on public companies' activities. It also assists private investors.

As well as detailing negative investment criteria - companies you should avoid - some funds work to "positive" criteria. They might invest in companies offering their workforce good pay and conditions, especially in the Third World, or firms with environmental protection policies.

"There is a good choice of funds for investors looking for long-term growth, much less if they are looking for income," says Bridig Benson, of Global Ethical Investment Advice, a firm of independent financial advisers (IFAs). "We pay attention to clients' key interests as well as their attitude to risk and their time frame. I have to know what they want to avoid."

If you want to buy a PEP or ISA without paying an adviser to help you select a fund, you can go to a discount broker and save at least 3 per cent on the initial charges. CIS Environ can only be bought through members of the CIS sales force.

n IFA Holden Meehan has produced a free `Guide to Ethical and Environmental Investment'. Tel: 0800 7314505.

Eiris will send you a list of 70 independent financial advisers specialising in the ethical sector. Call 0845 606 0324.

Contacts: CIS Environ, 0161 837 5060; PEP Direct, 0800 413186; PEP Shop, 0115 982 5105; Financial Discounts Direct, 0500 498477.


Bridig Benson at Global Ethical Investment Advice:

n NPI Global Care range: "NPI has the best ethical research unit among fund managers."

n Friends Provident Stewardship: "A good solid fund that has recently reinforced its management team."

n Jupiter Ecology: "A fund that has taken a creative stance and has a solid performance record. Also, investors can use other Jupiter funds in their PEP, such as its top-performing income funds."

Richard Hunter of Holden Meehan:

n NPI Social Index Tracker: "A fund that will buy into blue- chip companies that are the best in their various sectors."

n Henderson Ethical: "Kate Murphy, the fund manager, is really on the ball."

The sun rises over St Andrews golf course, but will it be a new dawn for the Royal and Ancient Golf Club?
sportAnd it's Yes to women (at the R&A)
Arts and Entertainment
Friends is celebrating its 20th anniversary this year
tvSeries celebrates 20th anniversary
Yaya Touré (left) and Bayern Munich’s Spanish defender Juan Bernat
footballToure's lack of defensive work is big problem for City
voicesApple continually kill off smaller app developers, and that's no good for anyone
Arts and Entertainment
Liam Neeson said he wouldn't

Liam Neeson's Downton dreams

Wembley Stadium
footballNews follows deal with Germany
Arts and Entertainment
A spell in the sun: Emma Stone and Colin Firth star in ‘Magic in the Moonlight’
filmReview: Magic In The Moonlight
ebooksAn unforgettable anthology of contemporary reportage
A 'Sir Alex Feguson' tattoo

Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear

Thriller is set in the secret world of British espionage

Life and Style

ScienceGallery: Otherwise known as 'the best damn photos of space you'll see till 2015'
Life and Style

Bomber jacket worn by Mary Berry sells out within an hour

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Audit Manager Central Functions

To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...

Credit Risk Audit Manager

Up to £90,000 + benefits: Saxton Leigh: Credit Risk Audit Manager required to ...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week