Investment advisers who ignore the ethical fund sector are neglecting the opportunity for big and long term returns for clients, according to data for the last ten years.
The figures from data provider Moneyfacts show over one, three, five and ten years, all ethical funds beat all non ethical funds.
Over the past year, ethical funds have posted an average growth of 16.8 per cent compared with 15.2 per cent from the average non-ethical fund.
With returns of 33.4 per cent, the EdenTree Amity European fund was the top performing ethical/socially responsible investment fund over the last year, followed by Unicorn UK Ethical Income (32.4 per cent) and Standard Life Investments UK Ethical (30.8 per cent).
Richard Eagling, head of pensions and investments at Moneyfacts said the competitive returns delivered by ethical funds are also evident when looking at how they have fared within the four Investment Association sectors that house the most ethical funds.
"In the Mixed Investment 40-85 per cent Shares sector, ethical funds have outperformed non-ethical funds over all surveyed terms (one, three, five and 10 years).”
He added: “Ethical funds have fared so well in this sector that Royal London Sustainable World Trust ranks first out of 103 funds over five years and Liontrust Sustainable Future Absolute Growth ranks third.
"Meanwhile, in the Sterling Corporate Bond and UK All Companies sectors, the average ethical fund is only beaten by traditional funds over 10 years.”
Mr Eagling added that he believes the notion that investing in an ethical way means accepting lower investment returns is a “myth”.
He said: “Given the strong performance of many ethical funds and the feel-good factor associated with investing with principles, the retail SRI fund sector should have a bigger following.
"It is disappointing that in the 33 years since the first ethical fund was launched, ethical funds still only account for 1.2 per cent of the total assets under management across the entire retail fund universe.”
Susan Hill, of Susan Hill Financial Planning in St Albans told FTAdviser that she has noticed an increase in interest in ethical funds among clients over the past two years, particularly among female clients.