Read more on ethical and sustainable investing in Morningstar's Ethical Investing Week 2013.
Ethical funds returned an impressive 24.5% in the 12 months to the end of July this year. Thanks to their exclusions, ethical funds outperformed all non-ethical funds, index trackers and even the FTSE 100.
While the blue-chip index rose 18.6% in the year to the end of July, its performance was hindered by a large weighting to lagging sectors such as mining, oil and gas and tobacco.
This is not a flash-in-the-pan result either. According to figures collated by Moneyfacts, ethical funds also outperformed their non-ethical counterparts across three years too - returning 36.7% to non-ethical funds' average of 31.7%.
Richard Eagling, head of investments and pensions at Moneyfacts, said ethical funds have clearly benefitted from their lack of exposure to ‘unethical sectors’ which have been amongst some of the poorer performing areas of the market over the last twelve months.
He continued: "Over three years ethical fund returns have also edged ahead of non-ethical funds, with the average ethical fund up by 36% compared with growth of 31% from the average non-ethical fund, whilst after five years there is very little difference in performance levels."
Longer term figures are not as flattering. Over 10 years ethical funds returned on average 56.4%, while non-ethical funds rose 128%. These figures have been influenced by the considerable emerging market rally however, which has since slowed.
Charlie Thomas, manager of the Jupiter Ecology fund ( Bronze rated) said that the area of environmental investing clearly illustrates the benefits of investing over a longer timeframe - and that investors in the sector should expect the recent impressive performance to continue.
"The long term structural drivers of growth are still very much in place and indeed increasing. The volatile and insecure conditions which had undermined the sector since the financial crisis are becoming more benign," Thomas said.
"We are seeing a consequent pick up in both interest and potential returns from a range of diversified industries and companies across many parts of the globe. This coupled with a more settled political climate lead us to the belief that the next ten years will be as exciting as the last."