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survey finds ethical funds are less volatile

November 1999

Ethical funds may be less risky than conventional investments, according to a new study by the Ethical Investment Research Service (EIRIS).

The EIRIS survey, which tracked the performance of 15 leading ethical funds over a five year period from December 1990 to May 1999, concluded they were less volatile than the mainstream market.

On a recognised measure of ‘annualised volatility’ they scored lower – at 10.4 per cent – than non-ethically screened funds in the same sector (10.9 per cent).

However, the study, Does Ethical Investment Pay? also found that ethical funds have marginally lower average returns.

Despite this, EIRIS concludes that ‘the balance of risk and return offered by ethical funds does not look materially different from that offered by non-ethically screened funds’.

EIRIS executive director Peter Webster claimed the findings ‘destroy the myth that ethical investment is an eccentric and risky business’, and show it is a viable option in financial terms.

‘Lower returns with lower risk may well represent equally good value for investors, depending on their risk-return preferences,’ he argued.




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