The ethical investment sector, however, remains niche. According to Investment Association figures, ethical funds represent a mere 1.2 per cent of the funds market overall in the UK.

Adrian Lowcock, head of investing at AXA Wealth, notes that pinning down a truly ‘ethical’ fund can be tricky.

“A lot of companies have sought to up their ‘ethical’ credentials since the turn of the century, some legitimately, others not so legitimately,” he says.

“As a result, some may question the degree to which some apparently ethical funds are ethical at all. For instance, the FTSE4Good Index – a tracker that follows the performance of ethical companies – includes shares in major banks and oil companies, which many ethical investors will have an issue with.”

CIS Sustainable World is another example of this phenomenon. Despite its name, its holdings include alcohol companies, pharma giants and banks – sectors arguably not renowned for their commitment to sustainability, or ethical conduct.

There are, however, several investment funds that adhere to ethical standards. There are three different gradients of ethical investment fund, categorised according to their ‘greenness’ – ‘light green’, ‘mid-green’ and ‘dark green’. The darker the shade, the more strict a fund’s ethical criteria.

• Light Green Ethical Funds

These funds have moderate ethical restrictions – typically, they exclude armaments, alcohol, tobacco, gambling, pornography and nuclear energy, but there is room for investment in businesses that produce pesticides, and sell fur.

Jason Hollands, managing director of Tilney Bestinvest, recommends Standard Life UK Ethical. While the fund’s exclusion criteria may not be as rigorous as that of ‘dark green’ funds, ‘grey area’ holdings are counterbalanced by actively positive stocks.

“There are many actively ethical holdings in these funds, including environmental technology and pollution control companies, companies that promote equal opportunities and diversity in their employment practices, and companies which donate to charities,” he says.

• Medium Green Ethical Funds

While stricter than their ‘light’ cousins, these funds still allow some exposure to companies with poor workplace relations, or companies responsible for ozone depleting chemicals. Investments tend to be made in smaller companies.

Hollands tips Aberdeen Ethical World Equity.

“Launched in 1999, the Aberdeen Ethical World Equity fund is an international equity fund with an ethical overlay,” says Hollands.

“Team managed, the fund screens out companies that fail to meet Aberdeen’s socially responsible screening criteria – and actively engages with companies on environmental, social and corporate governance matters.”

Excluded business include alcohol, animal tested cosmetics, companies deemed to have a negative impact on the environment, gambling, pornography, tobacco and weapons.

Lowcock recommends F&C Stewardship.

“Manager Catherine Stanley looks for shares that can deliver both growth and income, and focuses on medium and small caps,” he observes.

• Dark Green Ethical Funds

These funds have very rigid ethical and environmental standards (all stocks with even tangential relationships with tobacco, armaments, gambling, fur and pornography sectors are automatically excluded, as are businesses that employ child labour etc.).

Such funds may furthermore limit their performance by only investing in companies that actively seek to improve the environment, or deliver measurable social benefit (whether to their local communities, or the wider world).

Hollands recommends Kames Ethical Equity, which employs global research provider EIRIS to ensure the fund’s investments meet the highest ethical standards.

“With 25 years’ ethical investment experience, Kames has one of the largest UK ethical fund ranges,” Hollands notes.

“Launched in 1989, the Kames Ethical Equity fund is one of the UK’s oldest ethical funds with a longstanding and successful manager in Audrey Ryan.”

The list of businesses excluded by Kames is extensive, and includes companies involved in any form of animal testing, companies that give political donations above £25,000 each year, and companies in the following industries: nuclear power, defence, genetic engineering, alcohol, gambling, finance, pornography and tobacco. The oil & gas sector is almost entirely excluded as well.

Kames also features in Lowcock’s recommendations – Kames Ethical Corporate Bonds adheres to the same standards as the Equity fund. Lowcock further recommends Jupiter Ecology, which targets companies that have a positive impact on the environment.

“The fund’s holdings are diverse, but stocks in renewable energy, sustainable farming and recycling figure prominently,” Lowcock says.

“The fund has over 20 years’ track record and manager Charlie Thomas is very experienced. Jupiter has proven that it is possible to deliver a diversified ethical fund with good long term performance.”

• Passive Ethical Investment

While passive ethical investment vehicles exist, Hollands believes they may not appeal to every ethical investor.

“The leading ethical investment funds use their influence as shareholders to actively engage with the companies they are invested in, on issues around transparency, sustainability and good governance,” he notes.

“Legal & General – a firm with a laudable record of engaging with companies in its portfolios, and voting down resolutions it deems unethical – offer the Ethical Global Equity Index Fund, but with that you lose the ultimate sanction of divesting in a stock if it remains part of the index.”