Retired headmaster, Alasdair MacDonald has always tried to invest ethically. His first foray into the world of investing was via an endowment policy, which he and his wife took out when they bought their home, 15 months after getting married. The couple still live in the same property.
Despite the bad press endowment policies have received in recent years, MacDonald says this proved to be a judicious investment for them: it not only paid off the mortgage balance, but also paid out a surplus which more than covered their premiums.
He says: “Back in the 1980s investing in the stock market was not something that people like us did. Both myself and my wife are from working class backgrounds and our parents, though never unemployed, basically lived from one pay day until the next. Having a little cushion of savings was always an aspiration for them.
“Their main dread was to get into debt, and the avoidance of indebtedness is something that has always underpinned our mindsets.”
A Cautious Approach
As a result, the couple initially focused on cash savings, including TESSAs – Tax-Exempt Special Savings Accounts – the precursor to ISAs, and NS&I products.
But as their financial situation improved over the years, the couple decided to take the plunge and invest,
“Our mortgage was paid off in the mid-Nineties, and with me having become a head teacher, and my wife returning to work after raising our daughter we had a surplus of income over expenditure.”
Initially he invested in recommendations made by their teaching union, these included F&C Global Smaller Companies (FCS) and Legal & General Ethical Trust.
MacDonald says: “We still hold these investments. They have done very well over the period, and recovered following the 2008 financial crash, so this has been a good experience.”
The F&C Trust has been one of their best-performing holdings.
F&C Global Smaller Companies trust has a Silver Rating from Morningstar analysts, and a four-star performance rating, reflecting its strong performance against peers in recent years.
Morningstar analyst David Holder says: “This fund benefits from an extremely experienced smaller-company manager in Peter Ewins, who has been in place since 2005 and whose involvement with the trust dates back to 1997.
“The investment approach is sensible, established, and well-executed.”
L&G Ethical Trust has a three-star performance rating. This fund aims to secure capital growth from companies whose business conforms to a range of ethical and environmental guidelines. It invests in UK companies from across the FTSE 350 index.
According to Morningstar data it has delivered annualised returns of 7.65% over the past five years.
Ethical Investments Post Positive Returns
MacDonald, who lives in Glasgow, has continued to invest ethically and has been pleased with the results.
“All the funds in which we have invested have made positive returns, allowing for inflation. None have produced spectacular gains, but all have made adequate returns that have exceeded gains made on savings. We have never made a loss.”
He adds: “We are investing for the long term and are not seeking quick gains. As well as being risk averse we feel speculating for short-term gains is wrong, because it is using money to gain money, rather than to develop and grow the economy in the long-term interests of the population.”
He adds that he is concerned that “maximising shareholder value” has encouraged poor corporate decisions, as was seen with the banks in the run up to the financial crisis.
To this end, his portfolio also includes the Triodos Sustainable Equity fund, and Triodos Sustainable Pioneer fund.
Triodos is known for its ethical approach to investment. The Sustainable Equity fund has delivered annualised returns of 10.10% over the past five years, according to Morningstar data. Meanwhile the Pioneer fund – which invests in smaller and mid-cap companies worldwide – has delivered annualised returns of 12.34% over the same period.
MacDonald is 70 and is wife is 68. Both of them are lucky enough to have final salary pensions. This, with the state pension, adequately covers their spending needs.
MacDonald says: “We do not skimp on things we consider essential, but we are both relatively modest in what we want, for example we have never owned a car nor wanted to.
“As a result our income has often exceeded our expenditure and we have simply let it accumulate. We have no particularly investment goals, but we do wish to be able to pay our way, should something unexpected happen.”
He adds: “Since we have retired we do voluntary work and attend adult education classes. Unlike other retirees we are not eager holidaymakers. But we have one holiday a year, and regularly visit London, where our daughter now lives.”
The ethical approach to investing is reflected in their actions. Although the couple are not religious they give around 10% of their disposable income to charities.
