Investors today are increasingly keen to put their money in places where they can see that it is having a positive social impact. For many it is a deciding factor in the investment choices they make. These considerations are hugely important for many investors – particularly it seems for millennials – and there are a broad range of ethical investment choices available to meet the full range of risk appetites. Of course there are also varying degrees of impact too – socially responsible investing now covers a broad range of investment options.

A wide choice

These start, at one end of the spectrum, with what’s known as integrated investing. These types of financial products still have a good return as their first priority, but they will also consider any social or environmental impact of the investment. Another option is purely ethical investing – an option that chooses not to invest in industries or sectors that people consider to be harmful, such as alcohol, tobacco, weapons or pornography. The final area of socially responsible investing to consider is ‘impact investing’ – in which your money goes directly helping those causes that are important to you. This is, in many ways, an investment option that is just a step below pure philanthropy – of course it’s a chance to possibly make some money, but the real aim with impact investing is, well, to make an impact in a different kind of way.

A sound and sustainable strategy

But of course, this kind of ethical investment isn’t for everyone – it might be a step too far for those of you looking to still make good returns a priority. Portfolio diversification remains the safest strategy for weathering financial markets, but research from Moneyfacts indicates that impressive returns may be gained from entirely ethical investment strategies

Impressive growth

The experts there looked across a number of different investment scenarios, comparing ethical investments with non-ethical ones. The results were, we think, really interesting. They showed that on average the ethical funds outperformed the more ‘traditional’ investments, showing an average growth of 16.8% for the ethical option compared with 15.2% for the average non-ethical funds. This percentage growth was no one-off either – the ethical funds’ advantage was maintained over three and five-year periods. Once the funds’ performance was compared over ten years however, the non-ethical funds were on top again, showing 83 per cent growth against 75 per cent growth for the ethical funds.

Despite this longer-term drop off, we’d say that this shows that deciding to invest ethically doesn’t necessarily just have to be about doing the right thing socially or environmentally. It could also be the smart choice too for those of us looking to grow our investments.

And who, ultimately, isn’t trying to do that too?