3 Top Rated Funds for Ethical Investors

Socially responsible investments have outperformed the FTSE 100 over the past five years. To mark Ethical Investment Week we highlight the best sin-free equity funds

Emma Wall 19 October, 2015 | 1:30PM
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Ethical investing is a considerably broader sector than many imagine. Traditional ethical funds – referred to as “dark green”, do take a very restrictive approach to investing, screening out stocks that are involved in “unethical” industries such as alcohol, animal testing, tobacco, oil and armament firms.

Funds that follow the socially responsible investment (SRI) route invest in companies that adopt good environmental and social practices regardless of sector. This gives managers a wider choice of stocks, which can help boost returns and reduce volatility.

And as well as doing good these funds can deliver good-looking returns too. According to AXA Wealth the FTSE4Good UK ethical benchmark beat the FTSE All Share Index, returning 48% versus 43% over the past five years.

“Much of this has been driven by the performance of oil and mining sectors which have suffered over the last few years,” said Adrian Lowcock Head of Investing, AXA Wealth. “Many ethical funds have no exposure to these areas and therefore have protected investors from the falls.”

We highlight three Morningstar analyst top-rated ethical funds.

Standard Life Investments UK Ethical

An experienced manager and a positive performance track record make Standard Life UK Ethical a solid choice for investors seeking exposure to a UK equity portfolio with an ethical screen, says Morningstar fund analyst Samuel Meakin. 

The fund is managed by experienced ethical investor Lesley Duncan who has been at the helm since June 2004. She works as part of the UK equity team as a specialist for the support services, household goods, and construction and materials sectors. All stocks are subject to an ethical screen that incorporates both positive and negative ethical factors and is run by an independent research agency, EIRIS. Any given stock must pass the screen to be included in this portfolio. The fund has a Bronze Rating.

Aberdeen Ethical World Equity

The consistency and quality of the team and process underpinning Aberdeen Ethical World make it a strong choice, say Morningstar analysts. 

It is managed by an experienced and well-resourced global equity team, headed by Stephen Docherty, whom we hold in high regard. A unique feature of their approach is that there are no quantitative filters; they instead compile a global buy list of stocks recommended by their regional colleagues. Companies that fall out on social, ethical, or environmental grounds are then replaced, where a suitable alternative can be found. It is Rated Bronze.

Kames Ethical Cautious Managed

The Bronze Rated Kames Ethical Cautious Managed is a strong choice for ethically conscious investors says fund analyst Randal Goldsmith. It applies relatively high standards of ethical screening, yet performance has been strong and consistent relative to peers in the Investment Association Mixed Investment 20-60% Shares group and the GBP moderate-allocation Morningstar Category. The fund's charges are also competitive, adding to the attractions of this proposition. 

Co-managers Audrey Ryan and Iain Buckle have been involved in this fund since its launch in 2007. Ryan also runs Kames Ethical Equity, which has a Morningstar Analyst Rating of Silver, while Buckle runs Bronze-rated Kames Ethical Corporate Bond and comanages Silver-rated Kames Sterling Corporate Bond.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
abrdn Global Sust and Rspnb Inv Eq A Acc367.65 GBP-0.56Rating
abrdn UK Ethical Equity R Acc197.01 GBP-0.50Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar

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