How to choose ... what are the real differences between the funds?

Dark green funds These have the most restrictive list of investment exclusions and are likely to exclude entire sectors such as oil and gas, or even companies with poor employment practices. Examples of dark-green funds include F&C Stewardship Income, Aegon Ethical, Jupiter Ecology.

Light green funds Tend to choose larger companies and may be willing to invest in oil, pharmaceuticals and banks, although they usually avoid tobacco, arms and pornography. They might invest in a "best of breed" oil company that is greener or more environmentally conscious than others in the sector. They tend to be less restricted in their approach and are more likely to reflect the investment returns of the overall stock market. Examples include Standard Life UK Ethical and Axa UK Ethical.

Engagement funds Aim at proactively encouraging good behaviour by a company on social and environmental issues. Many go under the "sustainable" label, and tend to invest in companies involved in waste management, public transport, pollution control, conservation and recycling. Funds that use positive screening practices include Morley Sustainable Futures (SF) UK Growth and CIS Sustainable Leaders.

It.....continued below

Advertisement starts

Advertisement ends

An alternative analysis by fund rating group Citywire looks at managers rather than funds. It awards its prestigious AAA rating to just four ethical managers, Michael Fox of CIS Sustainable Leaders; Andrew Preston, of Aberdeen Ethical World and St James's Place Ethical; Mark Gull, of Norwich Sustainable Future Corporate Bond.and Philip Milburn, of Aegon Ethical Corporate Bond.

Best buys

Top performing ethical and environmental funds

(list based on one year rise)

CIS Sustainable Leaders - 29.7%

Jupiter Environment - 27.4%

AEGON Ethical Equity - 24.6%

L&G Ethical Trust - 23.1%

Standard Life UK Ethical - 23.0%

Jupiter Ecology - 22.8%

F&C Stewardship Growth - 22.8%

AXA Ethical - 22.6%

Old Mutual Ethical - 21.7%

Insight Eur Ethical - 21.0%

· Source: ethicalperformance.com