Ethical investments have been regarded as no more or no less risky than any other type of investment. The same investment principles apply to ethical investment funds than to anything else and therefore investors need to be careful to diversify their risk and do their homework on any potential investment opportunity. The exact make-up of any potential investment will likely be determined by how much risk an invidividual investor is prepared to make in much the same way as any other type of investment.

What about returns?

It must be said that by nature of the fact that Ethical funds are limited in the type of companies that it invest in, overall they are not as competitive as other funds that have free reign over the market. However this may simply be as a result of recent favourable market conditions for many sectors such as oil and mining and it is unlikely that these conditions will be sustained over the long-term. With this in mind, ethical funds are likely to prosper over the long-term.

Some ethical funds can make use of an investors annual £7,200 ISA allowance which is great for avoiding the taxman and some ethical ISAs are available. Triodos, Ecology Eartwise and the Co-operative Bank offer ethical cash ISAs which offer competitive rates but do not offer the highest levels of return.

Investing in an ethical funs is now accepted as a sound medium to long-term strategy. The increasing trend nowadays is to seek profit responsibly via ethical investments. Much of socially responsible investment concerns good, responsible business practices such as those which contribute to the local community or the environment. Business with progressive business practices are more likely to succeed in the long-term as a result.

Ultimately ethical investing is all about striking a balance between your principles and the level of return you are likely to receive. Viewing your funds performance over the long-term is an absolute must for any potential ethical investor, as the greatest benefit of any ethical fund is most likely to be left over the long-term.

Ethical funds have, overall, performed well compared to their unscreened counterparts. Indeed, in a speech to the 1998 AGM of the UK Social Investment Forum, John Denham MP (then Parliamentary Under Secretary of State for Social Security) said that “research currently underway in this field appears to suggest that ethical funds have performed better than other alternative investment approaches”.

It is becoming increasingly accepted that the socially responsible companies will prove to be an even better financial investment in the future. The rigorous screening processes involved in ethical investment can help to identify smaller companies that, in the long term, can perform extremely well.