Telegraph:

Environmentally friendly funds may not always be as green as you think.
Shareholders are the latest victims in the oil spill disaster — with no solution in sight, BP’s share price is plummeting as fast as the black gold is pumping into the Gulf of Mexico.
On Tuesday alone its shares dropped by 13pc and they are around 30pc down over the past two months. This is bad news for private investors and fund managers. BP is traditionally a defensive stock, meaning UK equity funds and cautious managed funds, as well as FTSE trackers, could have exposure to the mega cap and be feeling the effects of the fallout.
And, it may surprise you, so could an ethical fund. Seven funds in the ethical sector hold BP in their portfolio, including Aberdeen Responsible UK Equity, M&S Ethical and SWIP Pan-European SRI Equity. BP represents a considerable percentage of the CIS UK FTSE4Good Tracker at 8.26pc, while 8.04pc of the Family Charities Ethical fund is BP.
However, BP was removed from the Dow Jones Sustainability Indices last week. The firm that oversees the indices said the leak’s impact on the environment, local community and BP’s reputation meant it no longer qualified for inclusion.
So how can an ethical fund hold an oil company — especially one embroiled in the worst spill in US history? This is, after all, not the first blemish on BP’s record. In 2007 it was fined $62m for incidents at its Texas City refinery and a spill in Alaska.
Ethical investing hit £9.5bn by the end of last year — with 750,000 investors in ethical funds. This is nearly four times the amount invested a decade ago, and the number of funds has surged from just a dozen to 100, with new funds being launched every month.
Not all ethical funds are the same. Traditionally, ethical funds used to take a hardline approach to what they invested in, but the sector has evolved in line with its catchphrase “socially responsible investment” (SRI).
Rather than screen out stocks, funds that follow the SRI route take a more positive approach, investing in companies that adopt good environmental and social practices regardless of sector. This gives managers a wider choice of stocks, which can help boost returns and reduce volatility. It is also why stocks such as BP make the grade for some ethical funds.

The rest here.