Top environmentally and socially conscious funds highlighted (2023)

Top environmentally and socially conscious funds highlighted (1)

Top environmentally and socially conscious funds highlighted (2)

Jason Hollands

Within the UK investment industry, funds badged as “ethical” now stand at £20bn of assets according to the Investment Association. While this represents just 1.6% of total industry assets under management, this market share has increased from 1.2% over the last decade and ethical funds under management have grown just £4 billion over this period.The universe of funds specifically applying environmental, social and governance criteria also represents the tip of the an iceberg, as fund management groups have increasingly embedded the assessment of non-financial risks into their core investment processes and taken a much more active approach to engaging with the companies they invest in to encourage transparency and high standards of corporate behaviour.

In the past, investors wanting to invest with an ethical, environmental or socially responsible approach had to contend with a relatively limited universe of funds. This made it difficult to build a diversified portfolio across markets and asset classes. Thankfully, in recent years there has been an abundance of new funds launched which is very welcome in extending choice.

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To help investors who prefer to make their own decisions, we have put together a selection of funds and investment trusts, rated by their research team, that apply ESG criteria. These funds – dubbed the “Clean Fifteen” – cover a variety of assets classes, including equities, bonds, property and infrastructure, as well as different regional stock markets.

The Clean Fifteen

1 BMO Responsible Global Equity

This “mid green” fund has a global remit to invest in companies that are making a positive contribution to society and the environment, while avoiding those with damaging or unsustainable business practices. The fund’s key investment philosophy is ’invest, avoid and improve’. The screening and engagement of companies is the responsibility of a large internal governance and sustainable investment team. The fund’s ESG policies and stock universe are reviewed by an independent Responsible Investment Advisory Council, whose president is the Archbishop of Canterbury.

2 Fundsmith Sustainable Equity

This fund, managed by City heavyweight Terry Smith, invests in a concentrated portfolio of quality developed market companies from across the globe, able to sustain high rates of return on capital but which also pass the firm’s sustainable screening process. The fund will not invest in the following sectors: Aerospace and Defence, Metals and Mining, Brewers, Distillers and Vintners, Oil, Gas and Consumable Fuels, Casinos and Gaming, Pornography, Gas and Electric Utilities, Tobacco.

3 FP WHEB Sustainability

This fund has a global remit to seek out companies with strong growth prospects linked to nine sustainability themes: environmental services, resource efficiency, water management, sustainable transport, cleaner energy, safety, health, wellbeing and education. The fund has a predominantly positive screening approach, but will also exclude all ‘sin’ sectors e.g. alcohol, tobacco, gambling. It is also fossil fuel-free. An independent Advisory Committee reviews the portfolio holdings each quarter.

4 Impax Environmental Markets IT

This London Stock Exchange listed investment trust, managed by specialist environmental investment boutique Impax, will appeal to investors wanting to use their savings to invest in companies focused on environmental sustainability. The trust has a global remit to invest in businesses involved with technology and services in areas such as energy efficiency, water infrastructure, waste management and renewable energy.

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5 Brown Advisory US Sustainable Growth

While the US government has withdrawn from the Paris Accord on climate change, the US stock market is the largest on the globe and home to many companies that are making a difference. This fund has one of the longest track records in US ESG investing and allows investors to access the US markets, screening out companies that derive the majority of their revenues from alcohol, gambling, pornography, tobacco, military equipment, fossil fuels and which use animal testing for nonmedical purposes. Assessment of ESG criteria is incorporated into stock selection.

6 Liontrust UK Ethical

This fund invests in UK listed companies of all sizes, including early adapters and innovators in their sectors. The fund uses both positive and negative screening to analyse companies. Their ethical exclusions include alcohol, animal testing, fossil fuels, gambling, nuclear power, pornography, tobacco and weapons. Despite relatively strict criteria, the fund has delivered impressive returns.

7 Aberdeen Standard Investments UK Ethical

Managed by Lesley Duncan, one of the leading lights of ethical investing, this fund is an option for investors seeking a relatively strict approach which incorporates both negative and positive screening criteria of UK companies. Exclusions include companies that cause environmental damage or are involved in nuclear power, animal testing, genetic engineering, intensive farming, alcohol, gambling, pornography, tobacco and weapons. They also exclude any company with human rights violations or poor business practices. These screens eliminate around 40% of the FTSE All Share by market value. Positive criteria include environmental technology and pollution control, companies that promote equal opportunities, companies that donate to charities or are strongly involved in the community, and companies with good principles of business behaviour and ethics.

8 Trojan Ethical Income

This fund is an option for ethically-minded investors looking to receive dividend income. The fund invests in a portfolio of mainly UK equities (approx. 75% UK, 25% Global). The managers have a strong focus on capital preservation. The fund will invest in accordance with the parameters of its ethical investment criteria, which prohibit investments in alcohol, fossil fuels, gambling, pornography, tobacco and armaments.

9 EdenTree Amity European

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The fund aims to achieve long-term capital growth with a reasonable level of income, and has a value style bias. It uses both positive and negative screening to analyse companies, with a separate Socially Responsible Investment team and an independent panel reviewing the portfolio to ensure that the firm’s criteria for sustainable investments are adhered to. Companies with more than 10% of turnover from alcohol, gambling, pornography, tobacco, weapons, intensive farming, animal testing for cosmetic or household products are excluded.

10 Stewart Investors Asia Pacific Sustainability

The fund invests in large and medium-sized high quality Asian companies – including Australia, New Zealand and Japanese firms – with strong balance sheets and which are assessed as making a positive contribution to the social and economic environment in the country in which they operate. Engagement with management of portfolio companies is key. India is a major theme in the fund, representing 35% of the portfolio, with no exposure to mainland China.

11 Stewart Investors Global Emerging Markets Sustainability

This fund adopts a similar approach to the above fund but focuses on global emerging markets, taking in companies listed in markets such as South Africa and Brazil. A major theme in the portfolio is consumer staples, representing 47% of the fund.

12 Rathbone Ethical Bond

The objective of the fund is to provide a regular, above average income by investing in a range of sterling dominated bonds that meet Rathbone’s ethical and financial criteria. The portfolio primarily consists of investment grade corporate bonds, but some high yield and unrated bonds are also included. The team applies both negative and positive screening to all investments considered for the portfolio. The fund will avoid issuers involved in armaments, environmentally unsustainable activities, animal testing, tobacco, nuclear power, alcohol, pornography, gambling and predatory lending.

13 Muzinich Bondyield ESG Hedged

Muzinich is a leading specialist bond investment boutique. This global fund invests in European and US corporate bonds that meet ESG criteria and it is predominantly invested in investment grade bonds. The manager applies a zero tolerance screen for all companies that are noncompliant with the UN Global Compact, all companies involved in the production of controversial weapons and all companies where there is evidence of child labour in their operations. The fund will not invest in a company that generates more than 5% of revenues from the following industries: Alcohol, Tobacco, Gambling, Pornography, Weapons, Nuclear power, Fur and speciality leather.

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14 Greencoat UK Wind

This London-listed investment trust invests in large, mainly operational UK wind farms. It targets returns to investors of 8 to 9% pa, including annual dividends that rise in line with inflation. Approximately half of its revenues are linked to the UK government’s Renewable Obligation Certificate regime, with the other half determined by power price agreements with the major utility companies.

15 Civitas Social Housing REIT

This is the first UK Real Estate Investment Trust enabling investment in a diversified portfolio of social housing in England and Wales. The REIT is acquiring freehold properties which will be leased on long-term contracts, with the majority of rental income backed by the public sector.

Jason Hollands is managing director business development and communications at Tilney Investment Management and Best Invest

Further reading: ESG investing trends are flourishing and this is a good thing

  • ESG


What is a socially conscious fund? ›

Socially responsible mutual funds hold securities in companies that adhere to certain social, moral, religious, or environmental beliefs. To ensure that the stocks or bonds chosen embody values that coincide with the fund's principles, company issuers undergo a careful screening process.

What are the best performing ethical funds? ›

  • Featured Partner.
  • Best ESG Funds 2022.
  • Baillie Gifford Keystone Positive Change.
  • First Sentier Responsible Listed Infrastructure.
  • LF Montanaro Better World.
  • Schroder Global Sustainable Value Equity.
  • Trojan Ethical Fund.
  • Methodology.
18 Jul 2022

What is an ESG fund? ›

ESG funds are portfolios of equities and/or bonds for which environmental, social and governance factors have been integrated into the investment process. This means the equities and bonds contained in the fund have passed stringent tests over how sustainable the company or government is regarding its ESG criteria.

What is socially and environmentally conscious investments? ›

Socially responsible investing (SRI) is an investing strategy that aims to generate both social change and financial returns for an investor. Socially responsible investments can include companies making a positive sustainable or social impact, such as a solar energy company, and exclude those making a negative impact.

Are ESG funds good investments? ›

Other studies have found that ESG investments can outperform conventional ones. JUST Capital ranks companies based on factors such as whether they pay fair wages or take steps to protect the environment.

Do ethical funds perform better? ›

Making a choice to invest ethically is not only good for wider society and the environment, but it can be good for your portfolio, too, as ethical investments have been shown to outperform the returns of their non-ethical equivalents.

What is the best ESG fund to invest in? ›

Best-performing ESG funds
FundExpense ratio5-year return
Calvert Equity A0.91%14.48%
Delaware Ivy Large Cap Growth Fund A0.94%14.25%
Payson Total Return0.82%13.68%
Evercore Equity0.96%13.35%
6 more rows
21 Sept 2022

What are ethical investment funds? ›

Ethical investing is a strategy where an investor chooses investments based on a personal ethical code. Ethical investing strives to support industries making a positive impact, such as sustainable energy, and create an investment return. With an increase in ESG funds, there are more ethical investments than ever.

What are the 3 essential pillars of ESG? ›

The three pillars of ESG are:
  • Environmental – this has to do with an organisation's impact on the planet.
  • Social – this has to do with the impact an organisation has on people, including staff and customers and the community.
  • Governance – this has to do with how an organisation is governed. Is it governed transparently?
14 Jul 2022

Why is ESG important for investors? ›

Businesses with good ESG practices score higher in terms of reputation and carry less risk as they incorporate sustainability as their core value. Moreover, ESG analysis can help investors determine a business' long-term sustainability and any intangible ESG risks arising from these matters.

What is ESG in simple words? ›

What is the definition of ESG? ESG means using Environmental, Social and Governance factors to evaluate companies and countries on how far advanced they are with sustainability.

What are examples of sustainable investments? ›

Examples include: Individuals who invest—as part of their savings or retirement plans—in mutual funds that specialize in seeking companies with good labor and environmental practices. Credit unions and community development banks that have a specific mission of serving low- and middle-income communities.

What makes a sustainability portfolio effective? ›

These include: ESG integration, exclusionary screens, and sustainably-themed. These approaches can be used as the building blocks to create a cost-effective sustainable portfolio. When constructing a portfolio, cost and diversification are often among the most important considerations.

What makes a good ESG strategy? ›

Establishing an ESG Strategy implementation plan to embed sustainability within your operations and workforce. Create long-term objectives to monitor and deliver improvements across your organisation. Identifying current and future risks to your organisation. Independently verify all data reported to stakeholders.

How do you determine if a fund is socially responsible? ›

Review the financial and social performance

In addition to the financial performance reporting, look into the social impact reporting that the fund provides. If a fund aims to achieve particular responsible investment goals, it should be reporting on them.

What are examples of socially responsible investments? ›

One example of socially responsible investing is community investing, which goes directly toward organizations that have a track record of social responsibility through helping the community and have been unable to garner funds from other sources, such as banks and financial institutions.

When did ESG investing start? ›

The practice of ESG investing began in the 1960s as socially responsible investing, with investors excluding stocks or entire industries from their portfolios based on business activities such as tobacco production or involvement in the South African apartheid regime.

Does ESG really matter and why? ›

Even when ESG can be measured, there is no meaningful relationship with financial performance. Accordingly, the responses to ESG critics coalesce on three critical points: the acute reality of externalities, the early success of some organizations, and the improvement of ESG measurements over time.

Who are the biggest ESG investors? ›

Ten Largest ESG Funds and Their Performance
RankNameAUM $m
1Morgan Stanley Institutional Fund – Global Opportunity Portfolio (MGGPX)3,846
2Brown Advisory Sustainable Growth Fund (BIAWX)2,086
3Morgan Stanley Institutional Fund – International Opportunity Portfolio (MIOPX)1,761
4Calvert Equity Fund (CSIEX)3,766
5 more rows

Are ESG funds actually sustainable? ›

Here's Why. Environmental, social, governance investing sounds great, but unless you go the extra mile with your due diligence, your “green” investment may not be doing all the good you had hoped.

Why are ethical funds underperforming? ›

One of the main drivers is a shift in the widely held belief that investing ethically requires sacrificing returns. However, in the last year, research has shown that ethical funds have fallen behind non-ethical funds performance-wise.

Do ethical funds have lower returns? ›

In the end, the researchers found no evidence that ethical investment leads to lesser financial returns. In fact, the returns of the samples studied achieved returns at or near the overall market.

Why ethical investment is important? ›

Ethical investing gives the individual the power to allocate capital toward companies whose practices and values align with their personal beliefs. Some beliefs are rooted in environmental, religious, or political precepts.

How many ESG mutual funds are there? ›

There are now more than 550 ESG mutual and exchange-traded funds available to U.S. investors — more than double the universe five years ago, according to Morningstar.

Which is the best ESG ETF? ›

  1. 6 Top ESG ETFs. ESG ETF. ...
  2. iShares ESG Aware MSCI USA ETF. iShare ESG Aware tracks the S&P 500 index. ...
  3. Vanguard ESG U.S. Stock ETF. The Vanguard ESG ETF holds about 1,500 U.S. stocks. ...
  4. iShares Global Clean Energy ETF. ...
  5. iShares ESG Aware MSCI EAFE ETF. ...
  6. Vanguard ESG International Stock ETF. ...
  7. Nuveen ESG Mid-Cap Growth ETF.

What is the largest ESG ETF? ›

iShares ESG MSCI EM ETF had the second highest assets, reaching 6.51 billion U.S. dollars.
Leading ESG ETFs worldwide as of February 2022, by assets (in million U.S. dollars)
CharacteristicAssets in million U.S. dollars
12 more rows
23 May 2022

What is the difference between ESG and ethical investing? ›

The theory is that companies that don't impact the environment, have a social conscience and are well governed will out-perform other companies. That's a significant difference between ESG investment and ethical investment, which focuses more on moral and ethical judgements than investment considerations.

How many ethical funds are there? ›

The investment industry has been responding to the growing trend, with more than 70 ethical funds being launched during the first three months of 2020. This brings the total to over 2,500, though not all of these are open to UK investors.

Why do investors hold socially responsible mutual funds? ›

Perhaps most importantly, investors may have financial motives triggered by optimistic risk-return expectations for SRI or the desire to diversify their portfolio risk. Another possible motive could be that investors hold SRI in order to create a positive social image of themselves.

Does Vanguard have a socially responsible fund? ›

We currently have one active fund with an inclusionary strategy that includes companies making strides toward ESG practices, and one fund that's designed to support investors seeking actively managed global equity returns along with measurable impact on environmental and social challenges.

What are the three main ways investors can partake in socially responsible investing? ›

Ways to Make Socially Responsible Investments
  • Negative Screening. As implied in the name, the technique involves screening a company's practices and products and/or services before deciding to invest in it. ...
  • Positive Investing. ...
  • Community Investing.
13 Oct 2022

Is Calvert a good company? ›

Is Calvert Investments a good company to work for? Calvert Investments has an overall rating of 2.7 out of 5, based on over 55 reviews left anonymously by employees. 21% of employees would recommend working at Calvert Investments to a friend and 23% have a positive outlook for the business.

Why might institutional investors be interested in SRI? ›

SRI invests in companies with a sustainable business plan and the objective to generate long term competitive financial returns as well as contributing to a positive societal impact.

What Vanguard funds does Warren Buffett recommend? ›

Buffett revealed that his will stipulates that 90% of the money should be invested in a low-cost S&P 500 index fund with 10% in short-term government bonds. He suggested Vanguard, which operates the Vanguard 500 Index Fund ETF (VOO 2.40%).

What is the best ESG stock? ›

Best ESG Companies, Stocks
RankCompanyESG Score
1Worthington Industries75.82
2J.B. Hunt Transport Services73.09
3Verisk Analytics72.79
4Texas Instruments72.63
25 more rows
14 hours ago

Is Vanguard or Fidelity better? ›

In fact, Fidelity is our overall pick for the best online broker in 2022, so it is very hard to beat. All that said, Vanguard still offers some of the lowest-cost funds in the industry and will appeal to buy-and-hold investors, retirement savers, and investors who want access to professional advice.

How do you determine if a fund is socially responsible? ›

Review the financial and social performance

In addition to the financial performance reporting, look into the social impact reporting that the fund provides. If a fund aims to achieve particular responsible investment goals, it should be reporting on them.

What are examples of socially responsible investments? ›

One example of socially responsible investing is community investing, which goes directly toward organizations that have a track record of social responsibility through helping the community and have been unable to garner funds from other sources, such as banks and financial institutions.

What is the importance of socially responsible investing? ›

Socially responsible investing provides a mechanism for investors to align personal values with investment objectives. Environmental, social, and governance (ESG) factors can be a key way to assess the sustainability and social impact of an investment in a company or business.

Are Calvert funds good? ›

Fund Performance

The fund has returned -14.04 percent over the past year, 10.34 percent over the past three years, 14.49 percent over the past five years, and 13.20 percent over the past decade.

Is Calvert part of Morgan Stanley? ›

Calvert Research and Management is part of the Morgan Stanley Investment Management group of companies. Access to Calvert is available through Morgan Stanley Investment Management Fund's, in which Calvert serves as investment manager.

Who bought Calvert? ›

Today, the Calvert Funds are one of the largest and most diversified families of responsibly invested mutual funds. Calvert Research and Management is a wholly owned subsidiary of Eaton Vance.


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