The rise and rise of the ethical funds and accounts that the tennis champion prefers
The clocks go back this weekend, and Monday is Hallowe’en. Amid the darkness, however, is the annual campaign to raise awareness that investing ethically is not only good for people, but also for the planet. Not so much a trick, as a treat.
Good Money Week, which is co- ordinated by the UK Sustainable Investment and Finance Association and backed by financial giants such as Standard Life, highlights the options for those who want an ethical bank or a stock market fund that channels money into clean energy, sustainable farming and people-friendly practices.
The British have £1.5 trillion invested in ethical, sustainable stock market funds and pension plans. Among those who have espoused this strategy is Andy Murray, the tennis champion and Olympic gold medallist.
His decision to embrace the sustainable and ethical way to save for a rainy day or retirement is starting to become more mainstream as people realise that following your conscience does not necessarily mean lower returns. This has been the moral dilemma of the past.
Many high-street institutions have trimmed the rates on deposit accounts to the bone. However, Triodos Bank, another backer of Good Money Week, is offering some of the better savings rates. Its market-leading one-year, fixed-rate regular savings account pays 1.75 per cent. You can save from £25 to £500 every month.
One of the most popular schemes from ethical names with above-average returns is the Ecology Building Society’s regular savings account. Such has been the demand for this account that the society is no longer accepting applications. The Ecology Building Society is dedicated to building a greener society.
Triodos Bank, a Dutch ethical institution, has been operating in the UK for 20 years. It lists the businesses that it lends capital to and requires that they make a positive impact. Among its borrowers are the chef Hugh Fearnley-Whittingstall’s River Cottage farm; Neal’s Yard Remedies, the organic beauty company; and the Horton Housing Association in Bradford.
I would never be happy investing in tobacco or anything like that
Savers are also discovering that some of the newer banks and building societies without an explicitly moral ethos can rank highly when put to the test by Ethical Consumer, a group that rates the credentials of consumer products from savings schemes to laptops. The newness of these institutions means that they are unencumbered by past misdeeds, or are too small to be involved in racy practices.
Nationwide is rated among the virtuous — it is not involved in tax avoidance, for example — and pays a market-beating 5 per cent interest on its FlexDirect current account. The rate is fixed for 12 months on balances up to £2,500, although the interest drops to 1 per cent thereafter.
Metro Bank, too, launched only six years ago and neither invests in fossil-fuel companies nor facilitates tax avoidance. The bank’s main draw is its accessibility — branches are open seven days a week, 362 days a year.
For current accounts, the Co-operative Bank offers some of the best ethical options; it is handing £150 to newcomers who switch. The bank also runs a rewards programme that pays up to £5.50 a month to customers who stay in credit and use the account for everyday things, such as online banking or paying direct debits.
In this age of rock-bottom rates, it’s worth thinking of those extra pounds as interest. While the bank has lost some ethical kudos by selling part of its renewable energy assets, it’s still grounded in a socially positive policy.
If you want to invest your money in the stock market, filtering out companies that pollute or make products of which you disapprove, you will find that there is no kitemark for such ethical funds. This is strange because research shows that 63 per cent of people would like to be able to select investments in this way. However, although you may need to sacrifice some returns if you take this route into shares, some ethical funds are star performers.
The experts’ picks
Sam Lees, of Fund Expert, the online research hub, says the three best- performing ethical funds over the past ten years are Henderson Global Care Growth, with a return of 135 per cent, EdenTree Amity International (141 per cent) and Stewart Investors Asia Pacific Sustainability (341 per cent). He also highlights Kames Ethical Equity fund as the top ethical performer over ten years in the UK all-companies sector, with a return of 116 per cent, and Rathbone Ethical Bond fund, with its 70 per cent return, the top-placed ethical bond fund.
Clive Hale, of FundCalibre, the fund research website, also likes the EdenTree and Rathbone funds. He says: “EdenTree is a pioneer of responsible investing. It invests in a large number of smaller companies. The Rathbone fund invests in corporate bonds issued by large blue-chip companies. The ethical exclusions are simple: no mining, arms, gambling, pornography, animal testing, nuclear power, alcohol or tobacco.”
Mr Lees adds: “There is a potential cost to voting with your conscience. With the exception of the Stewart Investors fund, all the top ethical funds mentioned have been outperformed in their sector.”
Good Money Week runs from October 30 to November 5; goodmoneyweek.com
ANDY MURRAY Q&A: ‘I LIKE SUPPORTING BRITISH START-UPS’
What does being good with money mean to you?
“It means preparing for the future. Being a professional tennis player means you make money when you are young, so it’s important to save for when you are no longer playing.
“I have a financial adviser who helps me with my long-term financial planning, and Standard Life, my sponsor, has given me advice on what do when I retire.”
One of Good Money Week’s key messages is that you can make money and make a difference. Do you agree?
“Definitely. It’s important to stand by what you believe in. I would never be happy making investments in tobacco companies or anything like that.
“My decision to invest in Cromlix, a country-house hotel on the outskirts of Dunblane, my home town, was partly because I believed the hotel was an asset to the community that I grew up in. It provides jobs and brings tourists to the area.”
What did your parents do to teach you positive values around money?
“We never had lots of money growing up, so my parents worked hard to pay for everything. I think that’s a value that I’ve taken forward — that if you put in the effort, you will hopefully get the rewards.
“My mum always believed that you shouldn’t owe anything to anyone; her mum hated credit cards and would panic if she got a ‘final demand’.
“I think that’s a good way to live. When I was a child, I didn’t really have money: there is no prize money in junior tennis. I did chores around the house though. Jamie and I would have to do the washing up, tidy our bedrooms, walk my grandparents’ dog — lots of things.”
What lessons will you teach your daughter about values and money?
“Work hard at whatever you do. Be generous when you can and when it is important. And don’t spend more than you earn.”
How do you ensure that you make good money choices?
“I’m travelling so much of the year that I don’t have time to look after financial matters myself.
“I’ve worked with my financial adviser for a long time, so he is clear on my values and what I’m interested in investing in. I’m also working with Seedrs, the crowd-funding platform, because I believe that investing in start-ups is important. I’m keen to support growing British businesses and I’ve invested in about 15 small businesses over the past two years.
“Among the ones I am backing are Perkbox, the UK’s leading perks and benefits scheme, and WeSwap, the world’s first peer-to-peer travel money platform. It’s risky investing in start-ups because inevitably some will fail, so I spread my money around, but I’m looking forward to seeing how they all perform.”
Would you like to see fund managers report on the environmental or social impacts of their investment?
“It sounds like a good idea. As companies grow they should have a responsibility to do more for their staff and the environment. It shouldn’t just be about taking home profits.
“One of my sponsors, Standard Life, donated some of my time allocated to them as part of my sponsorship deal to the disability charity Scope last year. That was a nice gesture, and it was good to see a big organisation using my time to make a difference.”