Gone are the days where the sheer mention of the word ‘ethical’ in relation to investments conjured up pictures of soup-eating, hemp-wearing, free-spirited types with a bit of cash.

The ethical investment sector has grown-up a fair bit over the past few years, its cause furthered by a change in sentiment - fuelled by the financial crisis and a drive to attach responsibility to the way we look at and use our money.

Excessive shows of wealth and unapologetic wealth has moved to the realm of tasteless – and showing a more responsible attitude to the way you invest is seemingly more on trend.

According to data released by the Investment Association at the start of this year, net retail sales of ethical funds jumped from 206m in 2013 to £460m last year, the highest since 2007 when net retail sales amounted to £474m.

And it is not just that net sales are on the up, the question of ethics is penetrating the wider investment market.

Increasingly, companies are being asked to consider their ethical positioning more than ever with the view that an investor’s long term success is dependent on more than just a company’s financial performance but also how well they score on ethical questions.

For the cynical among us, it is after all a question of risk management. The view is that if you only invest in companies with good human rights practices, give something back to the community and clear accountability – the less likely the company will be subject to litigation, protests and loss of business.

But what of performance?

For investors wanting a genuinely ethically-focused fund with a decent track record for returns, the list of options have been narrow – but that is not to suggest that there are none.

To prove that ethics need not mean forgoing returns, the analysts from FE Research tasked themselves with assessing the ethical funds universe - with the view of getting a list of funds with a true foundation in ethical investing and a good performance record of at least five years.

FE Research first looked at what was on offer to the retail ethical investor in the UK, some 218 funds in total claiming to be an ethical, or socially responsible investment, fund.

After careful consideration, the team were able to exclude almost 90 per cent of the funds due to issues such as not having a good performance record, being an infrastructure bond and therefore very illiquid and being ethical in name only - failing to pass even the most basic, initial screening tests.

Once 25 funds were drawn and in a bid to narrow down the list further – the next step involved getting in touch with the fund houses for more information in order to pass the next level of the rigorous ethical screening process.

Finally, through the use of quantitative and qualitative assessment, a list of 13 funds that made the final cut. Funds where the manager consistently met the fund’s SRI and ethical objectives but importantly - also offered a high-performing fund, were selected.

While the process was certainly enlightening for the research team, it begged the question – why are so many funds in this sector ethical in name-only?

If one is to run a blanket search on FE Analytics, the investment data platform, of all funds in the Investment Association that fall under the umbrella term of ethical/sustainable fund – why is it that some of the best performing funds in the sector categorically fail the ethics taste?

There are still large number of funds which continue to pour millions of pounds of investors’ money into fossil fuels or heavily polluting industries, or into multinationals that have had their business practices less than favourably scrutinised when it comes to issues such as child-labour or fair wages.

If the ethical investment fund industry is to grow further, and let’s face it – our global society and the environment desperately needs it to, there needs to be greater scrutiny of these funds which slap on the name but fail to stick to the rules.

Investors, and their advisers, will need to make sure they seriously take into consideration all aspects of an ethical fund’s inner investment workings – and not just jump at the bit for a good performing fund paying just lip service to the ethical world. Ratings services, and indeed recommend lists such as FE’s newest addition, will go a long way to help the process.

It will be interesting to see what the state of the ethical sector is by this time next year, when the FE research team look to rebalance its ethical recommend list.

Read more: The ethical funds that made it on to the FE Invest Recommend list