The key question is whether being moral with money bears a financial cost. The evidence suggests this need not be the case.
Retail investments like unit trusts fall into categories; well-known examples include UK equity growth or smaller companies. Ethical and ecological funds can differ widely in the way they are run, and the type of shares and related assets they own. NPI's Global Care Growth, and Lloyd's TSB's Environmental Investor funds illustrate this point.
NPI's fund controls assets of around pounds 96m, split among 130 separate holdings. Small- and medium-sized company shares each account for 30 per cent of fund value, with the remainder in large company shares.
Lloyds' TSB's Environmental Investor fund is smaller, with current assets of pounds 24m split among 50 shareholdings in British firms. Of these only 10 per cent are in small companies,40 per cent in medium and the remainder in large firms.
Comparing investment performance in the ethical sector with that of the non-ethical sectors needs care. Over the last 12 months NPI's fund has risen in value by 13.96 per cent, and Lloyds TSB's 12.39 per cent. The ethical sector has, on average, fallen in value by 1.61 per cent.
This sounds poor, until the sector is compared to others. Over the similar period, UK growth funds, mainly holding shares in large firms, gave an average return of 12 per cent. More importantly the UK smaller companies sector fell by an average of 14 per cent.
Critics can still argue that the returns on these actively managed funds lag those of the FTSE All Share index. But last year NPI launched an ethical "tracker" index fund designed to replicate movements on the All Share Index. From its launch on the 1 July to 30 January, the fund grew by 1.87 per cent, while over the similar period the All Share Index fell by 1.73 per cent.