BLOG: Ethics and returns are not mutually exclusive

Written by:
There remains a misconception that an ethical moniker on a fund means giving up a real investment return for a more abstract social return. Hard evidence points to the contrary.
BLOG: Ethics and returns are not mutually exclusive

Certainly within the ethical bond space our fund – the Rathbone Ethical Bond Fund – and those of our peers at Royal London have all outperformed the sector over five years.

During a recent investment trip to Paris, it was clear that a number of European investors used an ethical screen not specifically for ethically-branded funds but instead as part of their everyday investment process. Over the course of my tenure managing the fund there have been a number of occasions where such environmental, social and governance analysis can actually provide an additional layer of analysis.

When we look at a bond, we take into account the Four Cs: Character (management integrity and the likelihood of repayment of loans), Capacity (the availability of cash-flows and assets to repay its obligations), Collateral (looking specifically at assets offered as security as well as other assets managed by the company), and Covenants (the prospectus and the details within it that affect the lending agreement and any restrictions on the bond). Having an ethical screen is a positive for that process.

More recently, we have been looking at ‘yin/yang investments’: investments that give positive social returns as well as good investment returns. One feeds into the other.

One example of a bond we have held for some time is social investment bond, Places for People. This is one of a new breed of “super housing associations” which have benefited from public funding streams, the onset of large-scale private finance from banks and the transfer of housing stock from local authorities.

One site, Lock 54 in Blackburn, is a beneficiary of directly invested monies in a Places for People bond. Places rebuilt 159 units of 1 to 4 bedroom mixed tenures homes. These homes included social housing, shared ownership, and outright ownership, some of which have wheelchair access.

They identified a community centre which they kept as the heartbeat of the development. Money was  used to fund the local community centre, now run by volunteers. They won lottery funding to create some open space, and encouraged a doctor’s surgery into the area.

Clearly, the investment was not just about building homes. The stable community has meant that voids are low, which wasn’t always the case, and meaning that the capacity to pay back debt is enhanced. As well as helping to build a community, the bond itself has performed very well for its investors.

Bryn Jones manages the Rathbone Ethical Bond Fund.

Tag Box

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
London rental yields lag behind rest of UK

The London buy-to-let market is providing landlords with the lowest rental yield out of all the regions in the UK,...