Ethical investment funds are retail financial products which explicitly add social or ethical goals or constraints to normal financial criteria in selecting their underlying share portfolio. By means of a case study of a UK fund, this paper explores how the relationship between ethical criteria and financial performance might be handled, which is one of the critical issues that arise in putting ethical investment into practice. The research confirms perceptions of a tension between the implementation of an ethical policy and the achievement of good financial performance, and it identifies some of the ways which fund managers might seek to cope with that tension. However, by studying the financial management of an ethical fund in practice, the paper also reveals the ways in which there might be a positive correlation between the financial performance and the ethical effectiveness of a fund, thus providing a complementary perspective to the earlier empirical studies and discussions which have focused on the possibility of ethical concerns undermining financial success.
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