It used to be the case that investing in ethical shares meant sacrificing investment returns. You could have one or the other, but not both. Thankfully, that’s changed. There are now several ethical shares that will not only produce a positive social impact, but will also generate impressive returns. In a world where Covid-19 has highlighted the true fragility of life, I think now is the time to step up our investments in these ethical shares and contribute something positive to society.
Socially responsible investment
Civitas Social Housing (LSE: CSH) is a FTSE 250 listed investment company that invests in social housing. More specifically, the group invests in social homes that are designed for specialist supported living. Its properties typically house adults with learning difficulties and other significant care needs.
The group’s housing is designed to improve tenant wellbeing. The homes are often a much preferred and cost-effective alternative to hospitals and care homes. Tenants are able to live freely in their own homes, with the benefit of dedicated 24/7 care. Civitas’s investment in effect facilitates improved care for these vulnerable adults, who would otherwise be stuck on waiting lists. The group adds much needed supply to a market where there’s an abundance of demand.
Civitas currently owns a diversified portfolio of over 600 properties, which collectively house over 4,200 residents. It’s been estimated that the company’s investment creates over £114m of social value each year. That’s £3.50 in social value created for every £1 invested.
What’s more, Civitas does all of this profitably. In the year ending 31 March, the group generated after-tax profits of £38m, up from £20m a year earlier. Recent updates suggest that performance has been completely unaffected by Covid-19. Income essentially comes from government provided housing benefit, which is non-discretionary spending-
Civitas does have a slightly high price-to-earnings (P/E) multiple of 18, but compensates with a dividend yield of just under 5%. The fact that earnings are reliable and predictable, along with its positive social impact, makes these ethical shares a buy in my view.
An ethical growth share
Another ethical share I like is Airtel Africa (LSE: AAF). The group specialises in providing telecommunications and mobile money services to customers in 14 African countries. Airtel provides internet data access and financial services to remote parts of Africa. The group is dedicated to promoting financial inclusion and reducing the digital divide. Its mobile money services enable cross-border money transfers at an affordable price, allowing migrant workers to send money back home to their families.
In response to Covid-19, the group has increased its support to African communities, providing free data for educational purposes and financial support to essential workers. Airtel has also recently announced a partnership with UNICEF, which aims to provide children with remote access to learning and to provide cash assistance to their families. The group also works with a group of primary schools to improve the quality of education for more than 18,000 schoolchildren.
Airtel is not a charity though. In the financial year ending 31 March, revenues grew 13% to $3.4bn, while net profits came in at $408m. The group has over 110m customers. With Africa’s growing middle class, favourable demographics and increasing smartphone usage, I think the future looks bright. A P/E of around seven and a huge 7% dividend, also make this ethical share a buy in my opinion.
