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This fund broke new ground, not only by avoiding the so-called ‘sin stocks’ that church funds had long shunned - alcohol, tobacco, pornography and defence – but also by introducing a new set of social and environmental criteria, such as human rights abuses, discrimination, pollution and deforestation.

Twenty-five years ago, the number of consumers speaking out against unethical and environmentally unsound practices was small and those who invested in this way even smaller.

Today, corporate responsibility, sustainable development and ethical consumerism dominate corporate planning agendas. Investors are playing a growing part in this trend, as companies and financial analysts recognise the impact ethics and sustainability can have on generating sustainable profits.

What started out in 1984 as a quixotic experiment has now turned into a big business, as investors not only intensify their scrutiny of corporate practice, but step forward to exercise their voice and shape corporate behaviour.

Amid the crisis that has struck the asset management industry, the IMA 2008 Asset Management Survey concluded that, despite ethical funds accounting for just over 1 per cent of total funds under management, growth over the years has in fact been relatively strong. Since IMA records began in 1992, ethical funds have grown by an annual average of over 19 per cent, despite slowing somewhat in 2003-08 to a still industry-beating 9 per cent annual growth rate.

According to the IMA, ethical funds under management as at Q2 2009 stood at £4.5bn, up from £4.1bn in Q1 2009, with 53 funds on offer. Compare this figure to Q2 2004 - £3.1m – or at the end of the last century - £2m as at end of 1999 – and the picture that emerges is one of ethical investment funds steadily growing in popularity.

Nevertheless, ethical funds have not quite managed to escape the trials of the last 18 months, with inflows slowing and outflows increasing in line with other asset classes. Still, investors appear to be committed to ethical investments – net sales for both retail and institutional investors has been positive each year from 1992, an impressive achievement considering the variable, often erratic, markets during this period.

Despite dips in annual net sales figures, the Ethical Investment Research Service (Eiris) report that managers of ethical funds have indicated 2008 was one of their best years in terms of inflows (the IMA record positive net retail inflows of £94m into ethical equity funds during 2008).

As assets have soared in the last quarter century, so too has the choice of products, with UK-domiciled green and ethical retail funds now available in 53 different shades, colours and sizes. They range from the so-called ‘dark green’ funds – those with a fairly comprehensive set of strict social, environmental and ethical exclusions – to more pragmatic ‘light green’ funds, to thematic funds, which concentrate on specific investment themes, such as climate change or clean technologies.

For example, investors can select funds operated by major investment houses that concentrate solely on climate change (BlackRock, F&C, Schroders), positive impact on the environment (Henderson, Neptune), alternative energy (Guinness Trust) and sustainability (Aviva, First State). In recent years, the first multi-manager ethical funds were also launched by Credit Suisse and Skandia.

The evolution of ethical funds has also seen a rise in active shareholder engagement with investee companies, as ever-larger pools of assets have accumulated over the years on behalf of end investors who want to see positive change in corporate behaviour. First introduced a decade ago in the institutional pensions markets, this approach has showed itself to be extraordinarily successful in driving awareness of sustainability amongst both companies and pension funds.

Engagement is now attracting the attention of retail investors, who bore the brunt of the crisis, and are becoming increasingly aware of the fact that, much as their shopping decisions can drive retailers to adopt more responsible practices, so their investments can influence companies and help drive improvements in standards.

Some investors will be attracted to the comprehensive approach offered by the longer-standing players - Stewardship, Credit Suisse’s Fellowship fund and Scottish Widows Ethical fund – which offer detailed screening across a range of social, environmental and ethical criteria.

In addition, ethically-based funds that also feature engagement with companies, by pressing for improvements in their environmental and social practices, are also garnering interest. Newer funds have additionally been attracting great interest with their focus on positively seeking out innovative technologies that provide solutions to sustainability challenges, through investment in clean energy, healthcare, biotech and the like.

As the concept of shareholder engagement gains ground, retail investors can play a valuable role as ‘active owners’ by adding their voice to the growing pool of investment institutions who are not afraid to speak up and voice the concerns of their clients on matters of corporate governance and sustainability.

Companies are subject to many pressures and demands, but those with by far the greatest leverage are their customers and their shareholders. These two stakeholders tend to be dispersed rather than acting together to exercise their influence, yet companies expend great resources to understand and anticipate their needs and are quick to respond if they see a reward – more sales or easier access to capital.

A further evolution of ethical funds is that they are no longer confined to the developed world markets of the G7 nations. Economic activity has clearly shifted east and south, while the supply of as-yet undeveloped natural resources is increasingly to be found in less developed markets. In addition to western companies becoming increasingly global, ethical funds themselves are moving beyond their old familiar territory and expanding into emerging markets, where local companies present both attractive investment opportunities for generating returns - but also ethical, social and ecological challenges to consider.

At the dawn of the 21st century, investors face the twin challenges of climbing their way out of the credit crisis and confronting new existential threats, such as energy security, climate change, population explosion, water stress and so on.

As shoppers, parents, future retirees and citizens, investors have the opportunity to shape their future and drive the emergence of innovative approaches to investment.

Businesses and investors alike are increasingly coming to recognise that a sound approach to ethics and sustainability makes good business sense, and the steady growth and ever-greater sophistication of what was once simply called "ethical investment" practice is a testimony to that vital link.