UK ethical and ecological funds showed an average growth of 8.1 per cent during 1997.
The return showed that ethical funds outpaced their mainstream rivals, after an average rise for all UK unit trusts and Oeics of just 4.7 per cent, according to Co-operative Insurance Services.
A table of ethical trusts' performance, compiled by CIS using figures from Micropal, shows that the funds returned an average of 73.3 per cent over the past five years.
The ethical funds are led in the performance stakes by the Credit Suisse Fellowship fund. A person investing £1,000 in the fund five years ago would have seen the value of the investment grow to £2,083.93 today, an increase of 108.4 per cent.
CIS head of communications David Mott says predictions that smaller and med ium-sized firms will outperform bigger-cap firms this year bode well for ethical funds.
He says: "Given the emphasis that many ethical funds have in smaller-company investments, we await the outcome of these predictions with great interest.
"By definition, ethical funds are restricted in the busines ses that they can invest in and larger companies find it har der to prove that they have no businesses or investments that contradict the guidelines."
But Framlington marketing director Craig Walton warns that, although certain smaller companies may outperform, it is dangerous to generalise.
Framlington manages the Framlington Health fund which has shown a 100 per cent increase over the past five years.