What Are Ethical Investment Funds?

When you think about where your hard-earned money goes to work, have you ever wondered if your investments align with your values? Ethical investment funds are transforming how people approach investing, allowing you to grow your wealth while supporting causes you believe in.

What does ethical investing mean?

Ethical investing simply means choosing investments that match your values. While financial returns remain important, you also consider whether your money is supporting companies that are making a positive difference for people and the planet.

The London Stock Exchange's Sustainable Bond Market has grown significantly, with over 720 bonds now raising around £335 billion over the past decade.

You'll often encounter terms like ESG (Environmental, Social and Governance), SRI (Socially Responsible Investing), and sustainable investing – these are all part of the ethical investing umbrella.

How do ethical investment funds work?

Put simply, ethical investment funds only invest in companies that match your values. These funds start by avoiding businesses you might find objectionable – like tobacco companies, weapons manufacturers, gambling firms, or adult entertainment providers.

But they don't just avoid the 'bad' companies. Fund managers actively seek out businesses doing good in the world. They carefully check each company to make sure it's genuinely helping to create a cleaner environment, healthier communities, safer workplaces, and a fairer society for everyone.

Examples of ethical investments

• Stock market funds. Ethical funds can deliver strong returns while doing good. Many sustainable equity funds have performed well over recent years, proving you don't have to sacrifice profits to invest according to your values.
• Government green bonds. If you prefer lower-risk investments, you can lend money directly to the UK government through their green bonds. The UK government now issues green gilts, where proceeds are directed towards a range of environmental projects. Since September 2021, this programme has raised £43.4 billion to pay for things like electric buses, wind farms, and protecting wildlife.
• Local energy projects. Platforms like Ethex let you invest directly in renewable energy projects in your local area, so you can see exactly how your money is helping build a greener future.

Are ethical funds a good investment?

You might worry that investing ethically means sacrificing returns, but evidence suggests otherwise. Investment firm Morgan Stanley reported that sustainable funds achieved a median performance of 4.7% more than traditional funds over 5 years in 2024. Before investing, check what companies each fund includes and how they've performed in the past. 

Remember that ethical investing isn't just about avoiding harm – it's about actively supporting the kind of world you want your money to help create. Whether you're passionate about climate action, social justice, or corporate responsibility, there's likely an ethical investment fund that matches your values and financial goals.

Past performance is not a reliable indicator of future performance.

Speak with one of our qualified financial advisers today to start your investment journey.

The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.