The ethical investment performance myth

A survey of UK consumers conducted by microfinance provider, Oikocredit, has found that there is a perception gap between ethical goods and ethical investment.

The results of the poll showed that 61% of woman and 53% of men said that they would choose products that were ethically-sourced over ones that weren’t, but that 56% of woman and 44% of men would actively seek investments that were billed as ethical.

The difference could be attributed to the misconceptions surrounding the performance of ethical funds—something that continues to blight the sector, and in some cases, restrict its progress.

By interviewing ethically-focused independent financial advisers (IFAs) and fund managers, Blue & Green Tomorrow has dispelled the myth.

John Mudge, a director of the Quadris Environmental Forestry Fund encouraged potential doubters to “look at our track record”.

Indeed, almost all of the ethical or sustainable funds that B&GT has featured have beaten their benchmarks. Given that these vehicles, by definition, set out to encompass the three Ps—planet, people (the two often forgotten by conventional funds) and prosperity—investing in a sustainable or ethical fund adds significant value beyond the financial.

However, the Oikocredit survey shows that the majority of respondents—58% to be exact—cite financial return as the most important consideration when investing. A meagre 9% said they’d consider the ethical implications.

In our vital search for a sustainable future, this simply isn’t good enough. The global economy is inadvertently governed by unsustainable industries that often have no positive impact beyond bringing forth profit—but at what real cost?

As Audrey Ryan, manager of the Kames Capital Ethical Equity Fund, said, “There is no long term performance penalty for investing ethically”. This, added to IFA Lee Smythe’s mantra of, “People are good”, leads one to naturally question the reasons why ethical investment isn’t more popular.

Perhaps more private investors would seriously consider ethical or sustainable options, if they took into account the extent to which their money is negatively affecting the planet and its people.

We encourage you to read our recent Guide to Sustainable Investment, which we hope will inspire you to combine peace of mind with a comfortable living—the perfect combination for a sustainable future.

Further reading:

What is ethical investment?

The Guide to Sustainable Investment