Sales of ethical and sustainable investment funds have tripled over the past year, with savers investing in fast growing, clean and renewable energy companies. Last year fund sales trebled to £10billion, thanks to people worried about Covid and the planet, according to the Investment Association.
This was up from £3.2billion in 2019, taking the total invested in environmental/ethical funds to £45.7billion.
While that is just 3.2 percent of total funds, the figure will increase as asset managers increasingly account for environmental, social, and governance-related (ESG) factors when buying companies.
Two in five investors say they would accept lower returns to make ethical investments, according to research from financial services specialists The Lang Cat and Schroders. David Macdonald at ethical financial advisers The Path, said: “You can do well and your money can do good.”
ESG funds are set to enjoy a massive boost as money is poured into clean energy and innovation, to achieve net-zero carbon emission targets.
Six out of 10 “sustainable” funds outperformed their equivalent conventional funds over the past decade, said financial services company Morningstar.
Some critics warn that ESG investing can be riskier, as it excludes key sectors such as oil and gas, tobacco companies and the big banks.
Adrian Lowcock, of investment platform Willis Owen, said: “Make sure your portfolio is not heavily exposed to one sector. ESG should grow strongly in the long term, but do not expect outperformance year in, year out.”