This represents only 1.2 per cent of total industry assets, a level it has remained stubbornly anchored at for the last decade.
Jason Hollands, managing director at Tilney Bestinvest, said: “The lack of cut-through for ethical investment over many years is really quite surprising when you look at other industries, where it is clear that sections of the public are willing to adjust their economic activity to reflect their values.
“This is all the more disappointing given the relatively favourable investment climate for many ethical funds in recent years.
“Ethical funds are typically structurally underweight commodity and oil and gas companies as these have high environmental impacts and often operate in countries with poor governance or human rights.
“These sub-sectors have had a torrid time of late as energy and commodity prices have tanked - a factor that has worked in favour of the relative positioning of many ethical funds.
“Secondly, in the case of UK ethical funds, these are often significantly skewed to mid-caps and smaller companies versus the index, parts of the market that have delivered much stronger performance than the FTSE 100 in recent years.”
It is clear the ethical investment industry needs to address a number of misconceptions to reach its full potential.
This special report will explain the different screening approaches taken by ethical funds, how these vehicles have performed against non-ethical peers and what developments could further boost their returns.
This special report is sponsored by Alliance Trust Investments. All editorial is independent.