Our new research* has shown that while 64% of UK investors plan to pick ethical funds over the next few years, over half (57%) report that they need more information about the performance of such stocks to make an informed decision (while 42% said they struggle to find any details about specific shares within a fund).
Timed for the start of Good Money Week yesterday, the findings from the poll beg the question ‘what exactly is an ethical investment?’ And again, with 78% of respondents claiming they are more likely to invest in a company that demonstrates ‘ethical practice’, information is key to satisfying demand.
John Tracy, head of TD Direct Investing Europe said: “The industry needs to be clearer about defining just what ethical investing is and the funds themselves should provide more detailed information about their investments.”
“UK consumers quite rightly want to know more about the performance of ethical funds, but also want the ethics of the business in which they invest to reflect their own. However, there remains a grey area around what ethical investing actually means and the information available to investors.”
The call for education is made even more reasonable by the fact that half of UK investors believe there may be a financial cost to investing in ethical funds, with two in five believing their ethical investments result in lower returns. However, despite this, respondents said they are still keen to push ahead even if it means taking a perceived financial ‘hit’ from selecting an ethical company.
Tracy added: “Investors deserve to be able to make their own informed, educated decisions about which ethical routes they choose.”
Now in its seventh year, the UK Sustainable Investment and Finance Association’s annual campaign, National Ethical Investment Week (NEIW), has been rebranded Good Money Week for 2014. Its aim is to encourage everyone to consider green and responsible investment and finance options.
The event highlights the risk to growth and value that comes from factors such as environmental concerns, repressive regimes or suspect tax structures. In tandem with heightened interest in renewables, community cohesion and crowd funding these amply demonstrate why people are considering their finances more broadly.
Certainly, consumers seem to know what broad directions they do and don’t want to take. Like the Rockefellers, who are moving out of fossil fuels because of climate change fears, 29% of our survey’s respondents avoid controversial industries such as tobacco, gambling and arms; 21% have invested in stocks they think bring a positive impact to society; while 15% do not choose companies they see as having a negative effect.
In addition, investing responsibly is clearly both a popular strategy – as well as one that can bring good returns. The number of trades made by TD Direct Investing customers in ethical funds increased by 84% in the last year.
Visit our Funds page to find out more about funds.
* Research conducted by Edelman Berland for TD Direct Investing, surveying 300 UK investors.
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