During lockdown we saw the environment flourishing, wildlife venturing closer to urban areas, better air quality and bird song which seemed louder than ever. But these weren’t the only things flourishing. Environmentally sustainable investment funds were growing. And this was amidst a general drop in the FTSE 100 of up to 33% at one point.
This is great news for the growing number of investors who want a more ethical approach to their investing, spurred on by high profile environmental campaigners such as Greta Thunberg. Evidence from companies such as global investment research firm, Morningstar, showed that not only did sustainable investments in Q1 out-perform traditional investments in all but one category during the coronavirus pandemic, but even in the past 10 years there was no performance trade-off associated with sustainable funds.
At Davidsons, we’ve also been encouraged by how our ethical portfolios have fared during the almost unprecedented global pandemic event. In fact, figures from Moneyfacts show that over the past, volatile, year to 1 July, average ethical funds available to UK investors GREW by on average 4.3% whilst non-ethical funds DROPPED by 1.5%.
Ethical funds aim to invest money into companies that try to prevent or reduce social or environmental harm and promote positive change. They are often described in various ways including: socially responsible investing; environmental, social and government; environmentally sustainable; and impact investing. All of which are often used interchangeably.
Richard Sykes, Associate Director at Davidsons notes that “Investing responsibly no longer means an inevitable trade-off between profits and principles. There are always winners and losers in any financial market crisis and the coronavirus pandemic has turned the spotlight onto sustainable investing as a feasible alternative to traditional investing when looking at returns. It’s important to look carefully, though, at the details of your ethical investment to make sure you know exactly what’s ‘under the bonnet’ and that it works with your particular principles and beliefs”.
At Davidsons, we’ve been building sustainable portfolios for years and we can talk you through choosing funds suited to your values and beliefs. Of course, markets can be volatile and past performance is no indicator of future performance.
Davidsons IFA is authorised and regulated by the Financial Conduct Authority.