Growth, diversity and long term gains

When ethical funds were first launched in the UK in the 1970s, the range of funds available was very limited, and they largely operated on the principle of exclusion. This was seen to limit the performance by excluding potentially profitable companies.

The situation is very different today. From a handful of funds, the number now in the ethical and sustainable investment sector has grown to a few hundred. This growth has been mirrored by the range of funds available, with options of all types.

These include:

  • lower risk fixed interest funds

  • infrastructure investments

  • share-based funds investing in all the major regions of the world

This range of options enables the construction of truly diversified portfolios that both manage the risk and offer the potential for competitive returns.

The evidence backs this up. The average ethical and sustainable global equity fund has outperformed the sector average in 4 out of the last 6 years, with a cumulative outperformance over the last 5 years. Returns were particularly strong in relative terms in 2020, a year when COVID 19 highlighted the need to address the sort of long-term global challenges that sustainable funds seek to address.

This is not so surprising as these funds are often focused on providing solutions to social and environmental challenges, rather than just avoiding controversial sectors. This means that they benefit from long-term economic tailwinds and avoid many of the headwinds faced by less progressive companies. These funds are not just good for the planet, but make good investments.

Global Growth Chart

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Positive Pennine – Investments that don’t cost the Earth
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