F&C;’s Stewardship Income Fund is to continue investing in smaller “green” companies, despite facing “headwinds” in 2007, say the company.

The fund avoids investment in areas that it considers ethically dubious despite strong performance, the Financial Times reports.

Commenting on their business in 2007, manager Ted Scott said: “We faced quite strong headwinds as small caps underperformed and we couldn’t invest in the tobacco and mining sectors, which were performing so well.”

He continued that their investment in Tesco has raised debate, but argues that food retailing itself is not “unethical”.

Statistics released by the Investment Management Association (IMA) showed that ethical funds under management in the third quarter of 2007 reached £5.8 billion.

Chief executive of the IMA Richard Saunders commented that ethical funds are experiencing “steadily increasing sales, albeit from a low level”.

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