Muna Abu-Habsa, investment fund analyst at Morningstar, suggested that before people decide to “align” their investment strategies with their beliefs, they should evaluate the performance offered by ethical funds compared with “less constrained offerings”.

According to Ms Abu-Habsa, a number of ethical funds tend to focus on companies lower on the “market-cap ladder” than other products, increasing the business risk involved compared with those targeting larger-cap assets.

“Further, ethical sector restrictions can weigh on performance should the permissible sectors stumble or those consistently ruled-out deliver significantly healthier showings (as been the case with resources issues in recent years),” she remarked.

The latest figures produced by the Investment Management Association revealed that ethical funds under management rose to £5.8 billion in the third quarter of this year.

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