Ethical investments celebrate 20th birthday

09 October 2007
This week marks an important milestone in the history of investment, as the Stewardship Income Fund’s ethical dividends celebrate 20 years of making a positive contribution to society and the environment, reports F&C.

By filtering out companies that contribute to pollution, armaments, alcohol, tobacco, gambling and pornography by investing their clients’ money in them, the Stewardship Income Fund have implemented strong ethical criteria and still managed to rank ninth place out of 41 other IMA UK Equity Income Sector funds.

Despite the restricted number of companies available which comply with their strict criteria, The Fund has now accumulated 445 per cent total return, compared to the sector’s median return of 319 per cent over the same 20 year period, illustrating the growing popularity of ethical investments over ones that pose a potential threat to the environment or global community.

During its early years, The Fund often had high exposure in small, out-of-favour companies as a result of the traditionally high scoring sectors – such as tobacco – being outside the realms of their ethics.

Ted Scott, manager of the Stewardship Income Fund explains: “The Fund's concentration in higher yielding smaller and mid-sized ethically acceptable companies meant that, at times, it found itself exposed to dividend cuts and profit warnings which meant performance could be volatile.”

“Accessing lower-yielding growth companies would not normally be on the radar of a conventional equity income fund, but this approach has allowed the managers to sustain the Fund's performance during periods when value companies are out of favour and growth stocks are in fashion. It has also helped to reduce its volatility.”

“Twenty years of performance is an important landmark for any investment fund as it provides a record which encompasses a wide range of market climates and stock market highs and lows. Significantly, it also shows that investors have been able to stand by their ethics and not have to pay a price in terms of good performance,” concluded Scott.

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