27 Dec 2024

Survey reveals it’s not easy being green

Interest in all things ethical has undoubtedly come a long way in a relatively short space of time and the same is true of ethical investment. However, the latest survey from Investment Life & Pensions Moneyfacts has revealed that ethical funds have struggled in the more difficult stock market conditions encountered over the last 12 months.

The survey examined the performance of ethical funds, conventional non-ethical funds, index trackers and the FTSE 100 over a number of investment periods (see table below). Our previous review of the ethical sector conducted in September last year noted that in a testing environment for most investments, ethical funds had suffered particularly badly. Unfortunately, the past year has offered little respite.
As table 1 below shows the average ethical fund has dropped 16.74% in value in the 12 months to 1 July 2009, while non-ethical funds fell by a margin of 12.3%. A year earlier, ethical funds had fallen 14.2 per cent over the same period, compared to an 8.31% drop for non-ethical funds. Over the last year, only three out of 60 ethical funds delivered positive growth.
Meanwhile, over three years, a previously positive return of 17.22% has turned into a 16.42%loss, which is also worse than the shortfall of 9.20% posted by non-ethical funds.
More encouragingly, over the longer term of five years, growth of 8.93% can be reported. However, this is a long way short of the 52.37% recorded a year earlier and also the return of 20.82% delivered by non-ethical funds during that time.
The disappointment is compounded over ten years, where an average loss of 4.28% again lags behind the growth of 26.74% posted by their conventional counterparts. Last year’s positive return of 26.51% is a distant memory.
Ethical funds versus non-ethical unit trusts (percentage growth)

	1 year	3 years	5 years	10 years
Ethical Funds	-16.74%	-16.42%	8.93%	-4.28%
Non-Ethical Funds	-12.37%	-9.20%	20.82%	26.74%
Index-trackers	-19.33%	-18.88%	11.77%	-6.72%
FTSE 100	-24.47%	-27.16%	-4.81%	-32.75%

Source: Lipper Hindsight. % Growth as at 1 Julyr 2009, total return, UK net, no initial charges

Richard Eagling, Editor of Investment Life & Pensions Moneyfacts said “Just two years ago, the defence for ethical fund performance was strong, with returns outstripping those of their non-ethical rivals. Unfortunately, the performance of ethical funds is now lagging behind that of their non-ethical counterparts. Although there is little doubt the past couple of years have been challenging for the green investor, the long term outlook for the ethical sector remains positive.”

Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.

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