IRELAND - Ethically-managed funds returned 3% for the first half of 2007 compared to 5.6% for equity-only funds.
Irish SRI funds invest in a mix of bonds, equities and property so it was mainly the negative return of their relatively high bond exposure which dampened their performance, Noel Collins, senior investment consultant with Mercer, explained to IPE.
However, he pointed out ethically-managed funds have proven themselves in "an unpredictable environment for investors" such as the market downturn following developments on the Chinese stock market, inflation fears or rising interest rates.
"The solid performance of ethically-managed funds is indicative of financial markets rewarding responsible investment," Collins said.
"Their performance is very comparable to that of traditional pension funds in Ireland," he noted.
Interest in SRI funds is increasing while actual take-up is still limited. Collins explained trustees of defined benefits schemes are cautious about adopting new or relatively new investment vehicles as they are bound by the prudent person principle.
"The perception that ethical investing solely involved screening out non-ethical investment opportunities and consequently perhaps having to accept lower investment returns is still prevailing."
However, among defined contribution schemes the actual investment in SRI funds is growing more rapidly, according to Collins, with the popularity of ethically-managed funds among some workers and the wish of employers to offer their pension fund members a wider range of funds to choose from.