FINANCE NEWS: Ethical investment stocks post smaller returns, claims report

Charities that place ethical constraints on their investments are suffering poorer returns than those with conventional investment strategies.

According to the WM Company's annual review of charity funds, ethical charity investments have lost an average of 0.26 per cent over the past five years, while non-ethical investments have posted a positive return of 0.26 per cent.

There are 18 funds in the WM ethical universe and 63 unconstrained funds.

"The difference between ethical and unconstrained funds is 0.5 per cent over five years,

said executive director Peter Warrington.

"If a charity has £50 million invested that amounts to a loss of £250,000 a year."

Alcohol and tobacco stocks - the ones most frequently excluded when investors take an ethical stance - have performed strongly in the past year, bucking the heavy falls for other equity sectors.

They have been considered reliable companies in contrast to over-inflated companies.

"The out performance from this sector has been substantial,

said David Kidd, chief investment officer at fund manager Chiswell Associates. "The out performance of 'vice stocks' to ethical stocks in the past year has been the highest in our experience."

But he warned that charities should not read too much into short-term investment trends. "You shouldn't draw firm conclusions from short periods but charities should be aware that if you preclude some companies from investment you reduce the universe from which the investment can add value,

said Kidd.

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