Ethical Investment: Can it Outperform Other Funds?

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Jul 2010
Bristol, United Kingdom, July, 21 2010 - Some investors might remain sceptical of ethical investment's ability to outperform its non-ethical rivals, but one expert has insisted that it can, and does, produce higher returns.

Rob Robbins, founder of US online ethical investment magazine Investing for the Soul, says it is possible to earn higher returns by choosing ethical funds over non-ethical ones.

Most studies of ethical or socially responsible investment funds find that their performance is roughly similar or sometimes higher than returns from conventional investments, he said.

Mr Robbins cites figures from America's Social Investment Forum which show that the vast majority of 160 socially responsible funds from a range of providers outperformed their benchmarks in 2009. He said:

"Based on such evidence, and particularly the results found and lessons learned from some new studies, I believe that in the future and over the longer term ethical/SR investments will generally produce higher returns than conventional portfolios."

Mr Robbins highlights the results of a study titled 'The wages of social responsibility', published in America's Financial Analysts Journal, which reveals that so-called 'best in class' ethical investments have yielded superior returns.

Any disadvantage resulting from excluding certain stocks from a portfolio are offset by adopting this 'best in class' approach, which, somewhat controversially, invests in the best-performing companies that have strong ethical or socially responsible credentials, but disregards what industry they belong to, even if it is one that is not in line with the investor's criteria.

Mr Robbins also believes that the recent BP oil spill will also encourage more people to sell out of environmentally dubious funds and invest in more socially responsible vehicles.

"As investors realize that they can apply their ethical/SR values to investing and make similar or potentially better returns compared to conventional portfolios, investors everywhere will eventually favour ethical/SR oriented funds and investments," said Mr Robbins. "And the added benefit will be a better world for us all."

Source : Fair Investment
 

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