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The first best-buy list of ethical investment funds has been slated after including funds that would have turned £100 into £80 over the past decade.
The ACE30 list, launched by fund shop Interactive Investor, purports to highlight the best options for investors seeking to make a difference with their money.
However, experts have said there are simply not enough good ethical funds to justify a 30-strong list. There are only 138 ethical funds on offer, meaning Interactive Investor’s list includes almost a quarter of those available.
In comparison, Interactive Investors’ main best-buy list includes 60 funds but from a basket of over a thousand.
Included funds like the iShares Global Clean Energy, a low cost fund which tracks the renewables market, has lost investors 21pc since 2009. Another, Threadneedle UK Social Bond, has been in the lowest quartile of performers in its sector, ranking 80th out of 95 over the past year.
Brian Dennehy, of analysts Fund Expert, said Interactive Investor was trying to “make a silk purse out of a sow’s ear”. He added: “The material, of a good enough quality, simply isn’t there. A buy list of ethical funds is a bit of a fool’s errand."
Best buy lists, meant to act as a rough guide for novice investors, have come under scrutiny in recent months after Hargreaves Lansdown, a rival investment shop, promoted the ill-fated Woodford Equity Income up until its suspension.
The fund was suspended in June leaving thousands of investors trapped.
Mr Dennehy added: "Surely the events of the last few months have highlighted that a ‘buy list’ does not serve investors well – it merely sucks in the unwary.”
Interest in socially responsible investments is on the rise, however. Tom Sparke, from GDIM, the fund managers, said he has seen a marked increase in demand for ethical and sustainable investments among clients since 2012.
Dzmitry Lipski, an analyst at Interactive Investor, said the iShares fund offered a low-cost way for investors to track the world’s biggest renewables firms.
Its recent performance was more encouraging, while the Threadneedle fund was “unique” and had been “close to the average, or marginally exceeded” its peers, he said.
He added: “Our objective with our ACE 30 list is to provide a thoroughly researched and trustworthy shortlist of rated ethical investments – which funds are selected, and what percentage of an overall portfolio it makes up, is entirely down to investors – and it’s still important to do homework.”
The performance of ethical investment funds still lag their more general counterparts. Research from Fund Expert showed of the 34 funds which make up the best performing 20pc among those investing in UK companies, just six are classed as ethical.
Critics also say there is often a disconnect between the companies ethical funds invest in and the expectations of everyday investors.
This is because different funds take different approaches, with some screening out “negative” companies entirely and others attempting to change firms from the inside.
The Interactive Investor list is split into three categories: funds which avoid certain businesses, those which consider a range of themes and balance the positive and negatives, and those which specifically target companies trying to make a positive difference.
Patrick Connolly, an adviser at Chase de Vere, said recommendation lists were a useful starting point for investors but should be “taken with a pinch of salt”.
He added: “The best approach for investors who want to make their own decisions is to largely ignore these lists, to do their own research and to have a good understanding of how funds are managed before deciding whether to buy or sell.”
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