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.