There is about £15 billion invested in green and ethical funds in the UK. However, this is only about 1.2% of the amount invested in ‘mutual funds’ as a whole, a figure that hasn’t budged for a decade.
This lack of take-up is sad, especially considering the number of studies that have now been done comparing the financial performance of ethical and non-ethical funds. Because overall, the evidence suggests that ethical funds don’t do any worse financially.
Carbon-divested funds are much newer and so it is harder to know how they are likely to do. And yet an analysis of the five years prior to 2015 suggested that investors who dumped holdings in fossil fuel companies actually outperformed those that did not.
Our research
To create this guide we used an American website called FossilFreeFunds.org, which allows anyone to easily access information on investment funds’ fossil fuel holdings.
The website awards 5 fossil free ‘badges’. They are:
- Free of the Filthy 15 (a US-focused list of the top 15 carbon-emitting US coal companies)
- Free of the Carbon Underground 200 (a list of the top 100 global coal companies and the top 100 oil and gas companies, ranked by the potential carbon emissions content of their reported reserves. The list is maintained by Fossil Free Indexes)
- Free of all Coal Industry
- Free of all Oil/Gas Industry
- Free of Fossil-Fired utilities.
Carbon divestment
FossilFreeFunds.org lists six UK investment funds that are both socially responsible and fully fossil free, thus being awarded all 5 divestment ‘badges’. They are:
- Henderson Global Care Growth
- Royal London Sustainable World
- Old Mutual Ethical
- Sarasin EquiSar Socially Responsible
- 7IM Sustainable Balance
- Alliance Trust Sustainable Future European Growth
In addition the AXA Ethical Distribution Fund is now also fossil free but as of June 2016 was yet to be listed as such on the Fossil Free Funds website.
The other funds we rated on the table are not 100% fossil free. We included them in the list, however, as they are pretty close and have other positive features such as investing strongly in renewable energy, being rated by Castlefield as an ethically strong fund, or being in ShareAction’s list of most ethically engaged providers (see our guide to Ethical Funds).
The investments of the funds that are not 100% carbon divested, taken from fossilfreefunds.org on 9th May 2016, are listed on the table below.
Mainly fossil-free funds
| Fund name | Remaining fossil fuel investments | Investment type |
|---|---|---|
| FP WHEB Sustainability | Has 1.36% of fund assets invested in China Longyuan Power Group Corp Ltd and 0.98% of fund assets invested in Hera SpA |
Fossil Fired Utilities |
| F&C Responsible Global Equity | Has 1.09% of fund assets invested in Spectra Energy Corp |
Oil and Gas industry |
| Jupiter Ecology | Has 1.08% of fund assets invested in China Longyuan Power Group Ltd and 0.56% of fund assets invested in Greenko Group |
Fossil Fired Utilities |
| ConBrio B.E.S.T. Income | Has 4.57% of fund assets invested in National Grid PLC and 3.57% of fund assets invested in SSE PLC | Fossil Fired Utilities |
| Impax Environmental Markets | Has 1.61% of fund assets invested in ENN Energy Holdings Ltd and 0.58% of fund assets invested in Greenko Group PLC |
Fossil Fired Utilities |
| Quilter Cheviot Climate Assets |
Has 3.33% of fund assets invested in National Grid PLC |
Fossil Fired Utilities |
The ConBrio B.E.S.T. Income Fund had the highest level of fossil fuel investment out of those we looked at. However, the company told us that it tries to combine negative and positive approaches, and that it invests in SSE plc despite its involvement in fossil fuels because of its significance in the wind power industry and transitioning the UK towards renewable energy.
Carbon divested funds: financial performance (updated bi-monthly)
| Carbon divested fund | 5 year cumulative performance to 29/01/2021 | Ethiscore as of 09/2020 |
|---|---|---|
| Janus Henderson Global Sustainable Equity Fund | 164.9 | 7 |
| BMO Reponsible Global Equity | 139.5 | 10.5 |
| WHEB Sustainability | 111.4 | 16 |
| Triodos Pioneer Impact | 110.0 | 16 |
| Jupiter Ecology | 103.4 | 6.5 |
| EdenTree Amity International | 86.6 | 7 |
| Quilter Cheviot Climate Assets* | 66.5 | 6 |
| Rathbone Ethical Corporate Bond | 40.9 | 6 |
| AXA Ethical Distribution | 33.7 | 10 |
| Kames Ethical Corporate Bond | 22.8 | 5 |
| Sarasin Sustainable Equity Real Estate | 22.1 | 11 |
| Castlefield BEST Sustainable Income Inst Inc | 8.4 | 13 |
| ASI Global Equity Impact | Data unavailable | 6.5 |
| IA Global (for comparison) | 104.5 | - |
* January 2021, data from quiltercheviot.com
Following the publication of our guide to Ethical Funds in EC186, we have expanded this table to include all carbon divested funds as identified by 3D Investing.
