The vehicle returned 3.54 per cent compared with a loss of 1.49 per cent for the sector average. The same is true over a longer period; two ethical products appear in the top-eight best performing corporate bond funds over the last year.
Rathbone Ethical Bond returned 10.51 per cent over this period and Royal London Ethical Bond managed 9.4 per cent compared with the 6.77 per cent sector average.
Performance of funds over 3-yrs
| Fund |
1-yr performance (%) |
3-yr performance (%) |
| Rathbone Ethical Bond |
10.51 |
18.55 |
| Royal London Ethical Bond |
9.4 |
14.5 |
| AEGON Ethical Corporate Bond |
7.52 |
11.06 |
| F&C Ethical Bond |
6.84 |
17.53 |
| IMA Sterling Corporate Bond |
6.77 |
15.53 |
| Stan Life Inv Ethical Corporate Bond |
6.49 |
13.45 |
Source: Financial Express Analytics
"I think some IFAs might be surprised by this but they shouldn’t be," said Chris Wise, who advises at Budge and Company.
"There is an attitude among IFAs that ethical vehicles are predisposed to the ethical screening process rather than to performance. In reality IFAs should be looking at the investment process."
Bryn Jones, who manages Rathbone Ethical Bond, says his fund is managed like any other corporate bond fund.
"We identify themes that we want to be exposed to, then we look at the credit rating, make a valuation and explore the risk framework," he said.
"Once we have picked a holding we are interested in investing in, then, lastly, there comes the ethical screening process."
Jones’ investment strategy is driven by identifying the best holdings and not, as many IFAs assume, by the ethical framework.
"I don’t want the fund led by the ethical process. I try to marry the investment and ethical process which is helped by having the ethical screening governed by an independent green bank."
Wise believes that the IFAs and investors will look increasingly to the investment strategy of ethical vehicles.
"As time progresses, and performance is revealed, I think prejudices will go away. People will acknowledge that investing is about identifying the best managers, whether they have an ethical focus or not."
He added that ethical products might also provide diversity benefits in the sector, which can actually boost growth.
"Ethical funds can be a tactical play because they invest in a restricted universe which can segregate the fund from the rest of the sector."
"It can take the hand-break off a sector that might be too weighted in holdings the ethical bond does not have a remit to invest in."
Wise says there are also marketing benefits for ethical products.
"Ethical funds cover investors who simply want the best managers and best performance and aren’t interested in the mandate of the fund. It also ticks a box for those who demand an ethical process," he finished.