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Big rise in ethical investments

The number of people considering investing in ethical investment funds has shot up over the last year, as a raft of new product launches has helped to drive a new boom in the sector.

According to new research by the Co-operative Insurance Society, some 85 per cent of equity ISA investors are considering investing in ethical funds this year, up from just 67 per cent a year ago.

According to the Investment Management Association, sales of ethical investment funds gave already grown in recent months, up by 18 per cent in the final quarter of last year to £5.9bn. Sales of ethical personal finance products as a whole have also grown strongly, rising by around 15 per cent last year from £11.6bn to £13.3bn. As well as ethical investment funds, there are now increasing numbers of ethical credit cards, mortgages, bank accounts and other financial products.

The Co-op said some 77 per cent of people now believe ethical funds can perform in line, if not better, than mainstream funds.

"While ethical investment still represents a small amount of the overall market, evidence strongly suggests that growth is set to continue," said Zack Hocking, the head of investments at Co-operative Insurance. "We expect to see significant interest from customers wanting to invest their ISA allowance ethically as the deadline approaches."

Mike Fox, the fund manager of the Co-op's Sustainable Leaders Trust, added: "Ethical funds are demonstrating that responsible investing and high performance can go hand-in-hand.

"The increasing importance of the environment, human welfare and sustainability in society means these funds should be well positioned to deliver consistent performance in the long-term."

According to Trustnet.com, the average ethical UK fund has returned more than 81 per cent over the past five years, and just under 20 per cent over the past three years. In contrast, the best unconstrained UK equity funds have averaged slightly higher returns of around 88 and 28 per cent over the same periods.

However, the top performing ethical fund, Aegon's ethical equity fund, has returned around 137 per cent over five years, placing it within the top 15 per cent of UK funds.