The survey examined the performance of ethical funds, conventional non-ethical funds, index trackers and the FTSE 100 over one, three, five and ten years. It found that over a one and three-year period, the average ethical fund has delivered superior returns than both non-ethical funds and the FTSE 100 index.
Over the last 12 months the average ethical fund has posted growth of 18.3 per cent compared with 13.7 per cent growth from the average non-ethical fund, 15.7 per cent from index trackers and just 13.02 per cent from the FTSE 100. Ethical funds are also now outstripping non-ethical funds over three years with growth of 57.2 per cent compared with 52.3 per cent.
Although over the longer term the non-ethical returns do gradually pull ahead, the margins of victory of around one per cent over five years and just under six per cent over ten years are relatively small. It is also interesting to note the amount of ground that ethical funds have made up over the last 12 months, as at this time last year non-ethical funds enjoyed an advantage of around 12 per cent over five years and almost 19 per cent over ten.
Considering the excellence of their all round performance, it is little surprise to find that some individual ethical funds are performing admirably within their IMA sectors in comparison with their conventional counterparts. F&C’s long running Stewardship Income fund is ranked second within the UK Equity Income sector in terms of cumulative performance over one year. Jupiter Ecology lies sixth within the Global Growth sector out of 167 funds for cumulative returns over three years, whilst in the UK All Companies sector, AEGON Ethical Equity is ranked 16th out of 290 over this term. The Balanced Managed sector sees Henderson Global Care Managed ranked second after one year and eighth over three.
Richard Eagling, editor of Investment, Life & Pensions Moneyfacts, said: “The strong investment returns enjoyed by ethical funds in recent years have helped to shatter the misguided belief that ethical investments will always underperform traditional investment funds and that sustainable business practices restrict company growth. Instead, ethical funds have outperformed both their non-ethical rivals and the FTSE 100 over the last three years. These results provide compelling evidence that those companies who adopt sustainable practices should be tomorrow’s winners.”
