Christmas is a time for giving, so it’s not surprising at this time of the year that many investors turn their attention to ethical funds, which aim to deliver positive change as well as financial returns. Research by Axa Investment Managers shows that some 52% of consumers now want to see hard evidence that their money is making a positive social or environmental impact.
Ethical funds have historically had to battle the assumption that ruling out certain sectors or industries, such as alcohol, tobacco and arms, would hamper investment returns. But the strong track records that many of these funds have built up have proved this is not necessarily the case. Moreover, many younger investors prefer to prioritise ethical issues over top-of-the-class performance.
Axa’s research found that 48% of investors are interested in green technology, while 31% see climate change as an attractive area to invest in. One-in-five people surveyed would like financial firms to make investments on their behalf that provide a long-term positive impact on society. Adrian Lowcock, investment director at Willis Owen, says: “For me, ethical investing has come a long way in recent years. Once it was all about avoiding the bad companies, but today there is a greater focus on companies that have a positive impact.” He says there is evidence to suggest that businesses which implement ethical, social and governance (ESG) considerations produce higher profits and see better share price performance. However, he does warn that these funds may be more volatile than others as there will be periods that the sectors they avoid outperform and those they focus on are out of favour.