But at present, there is little evidence that Scottish investors are really interested in putting money into funds which focus on green or ethical issues, despite concerns about problems such as climate change in the run-up to the Copenhagen summit, or the ethics of bankers on large bonuses.

A straw poll of Scottish investment advisers approached by The Herald found that while all said they were more than happy to give advice on green or ethical investments, they found very little demand for it among their clients.

Richard Wadsworth, of financial advisers Fitzallan, spoke for many when he said: “Though we always ask investors if they have any particular views on where they would or would not like to invest, we have found little appetite for an ethical approach, even though there is no evidence investment performance is sacrificed by taking this route.”

At Glasgow advisory firm Save & Invest, investment specialist Graham Scott has had the same experience. “The number of our clients who ask for ethical investments is very small, probably around 2% of the total. Even those who do tend to be happy with maybe one or two ethical funds in their portfolios rather than having all their money invested in that way.”

This more pragmatic approach can be wiser than sticking entirely to ethical investments, according to David Thomson, investment director at the VWM Consultancy. Otherwise, he says, it can make it more difficult to construct a really balanced portfolio.

He explains: “By their very nature, ethical funds tend to be skewed towards medium and smaller-sized companies which can provide good long-term growth but can also be more volatile. Ethical investors normally won’t have exposure to the more defensive investment sectors, which tend to be regarded as unethical, such as the tobacco, defence and nuclear power industry.”

UK government bonds can also be a problem, says Thomson, whose firm usually recommends clients hold a portion of their investments in UK gilts for security.

“While the government uses the money for good things, such as for schools and hospitals, it is also financing activities which some may find unethical, such as weapons.”

He finds that investors are normally happy to compromise and take a “light green” approach.

Research on behalf of The Co-operative Investments, which runs the Sustainable Leaders Trust, claims that while ethical investment currently equates to less than 2% of the overall UK market, once investors are given an explanation of sustainable investment themes and opportunities, 65% of investors are “unknowingly ethical”.

Adviser Julian Parrott, at Edinburgh-based specialists Ethical Futures, says his firm has seen growing demand, and believes the Scots have a liberal tradition which tends to predispose them towards ethical investments.

He also feels public distaste for the activities of executives on fat bonuses in the mainstream banks has increased consumer interest in banks such as the Co-operative and Triodos which have more sustainable business models.

He adds: “One sad aspect of the crisis is that mutual organisations, including building societies like the Dunfermline, which would formally have been a natural home for ethical savers’ money, have let them down.”

Parrott believes a lot more Scottish investors would be inclined to consider ethical investment if it was demystified, and his firm is involved in a seminar next week in Edinburgh with Triodos Bank and Aegon Asset Management.

Nowadays, there is no shortage of investment funds available for anyone interested in taking an ethical stance: 25 years since Friends Provident launched the first ethical unit trust, £5.5bn is now invested in ethical funds, with some £59m flowing into the sector in the last quarter alone.

The traditional strategy of ethical funds is to avoid the “sin stocks” such as those involved in arms, pornography or tobacco. But many funds adopt a proactive approach – a strategy Parrott supports.

“It is as much about harnessing the power of money as avoiding the nasties,” he says. Two funds he supports are First State Asia Pacific Sustainability, which places an emphasis on investing in companies which make a positive impact on local sustainability in Asia, and Jupiter Ecology, which focuses on environmental technology.

“If anything can make a case for long-term investment in ecologically sound businesses then this is the fund.”

Case Study: Simon Pepper

When the banks collapsed last year, small investor Simon Pepper was particularly glad he had decided to adopt an ethical approach in taking financial advice, writes Simon Bain. “It seems to me you can put your conscience on hold and concentrate on rates of return, or look for rates which have been checked against a set of ethical criteria. Then you have got the exceptionally good feeling not only of putting money where it is making change for the better, and getting a return from it, but of taking away your investments from those who don’t fit that.” Pepper, whose money is invested on the advice of Ethical Futures with the Rathbone Greenbank specialist ethical manager, adds: “We were fortunate to have made this decision before the banks collapsed. If we had just been relying on bog standard financial advice I think we would have lost a lot of what we had.”

Picture: Gordon Terris