Have the issues around sustainability moved far enough into the general consciousness now for ethical investment to shed its rather ‘faddish’ reputation?

JP: You would have to be obstinately cut off from the real world to still describe ethical investing as a niche or passing fashion. We have more than enough evidence that it is a very appropriate response to a very troubled world.

So how do you define ‘ethical’ behaviour? While some funds screen only for severe issues such as financing the arms trade, others extend their blacklist to companies involved in gambling. Where do you draw the line?

JP: This is a very important point. I know where my ethical line is, and I don’t expect everyone else to draw the line in exactly the same place. But it’s not just about negative screening – not investing in the bad things. We also have to concentrate on investing in the good things. I’m always anxious to invest in the companies that are creating a sustainable future, rather than simply not investing in those doing unsustainable things in the present. As such, climate change is a huge issue for me.

Do you feel that bigger corporates are becoming more environmentally aware?

JP: It’s very easy to be cynical and claim that big companies are in it for reasons of ‘greenwashing’ and PR. I don’t think there’s any justification for that. The companies we work with at Forum for the Future have made very serious commitments, both on environmental and social matters and on ethical issues like human rights. If you look at the net commitment of these companies over the past 10 years, there’s no question it’s a major change. But if you look at the state of the world, the collective response is still hopelessly inadequate. Is business doing enough? No. Will it have to do more in the future? Yes, it absolutely will.

Has this realisation seeped through to the public? Will consumers’ concerns over ethical issues remain, even in the face of their more immediate worries about the economy?

JP: The sustainability agenda has a lot to do with efficiency, so it is actually strengthened because of the economic downturn. When the economy was strong, the arguments about increased energy efficiency perhaps didn’t make that much sense. People didn’t care about saving £20-£30 a month. But anywhere between £30 and £100 a month – the minimum saving you’d expect if you got serious about energy efficiency – has now begun to look pretty useful.

So, as well as investing in sustainable development, does your concern for climate change extend to avoiding oil companies and heavy polluters?

JP: I’m a huge advocate of living more sustainably, but I would never claim to have a completely sustainable lifestyle. I have to fly quite a bit, so it would be very hypocritical of me to say everything has to be squeaky clean. Does anybody lead a life that is completely independent of the use of fossil fuels? One has to use common sense and not be too absolute.

Is it a problem that certain investors are looking to ethical investment simply for profit, rather than acting out of genuine social concern?

JP: I remember when a lot of people started investing in ethical farming, and it suddenly became easier to make much better returns from organic. There were a lot of people saying: “I don’t like this, all these people are coming into organic farming just because they can make some money.” I remember wondering what their problem was. If everyone has to do the right thing all the time, and has to have the right motives for doing so, we’ll never get to a better world. In a profit-based entrepreneurial world, if they’re doing it to make money out of it, then fine. There’s nothing inherently wrong about people making money.

Should ethical funds form a part of every investor’s portfolio?

JP: Even extremely cautious, conservatively minded mainstream investors should start to explore having a percentage of their holdings in ethical funds. You can understand why they might be reluctant to put the whole thing into different ethical opportunities. But there is an argument that by taking up holdings in ethical funds, investors can further spread risk by making sure their portfolio reflects the diversity that’s available out there.

So how should those new to ethical investing approach the area?

JP: It’s really important to follow your own ethical compass and find something that suits your needs. That’s the only downside: you may come away from the research feeling so overwhelmed by all the difficulties involved in making a decision that you end up doing nothing. That’s why a good step would be to take expert advice. Of course, it’s crucial to be as alert to performance as you would with any mainstream choice of investment. We should have just as high a set of expectations of returns from ethical funds as we would for mainstream funds.

How do you see the future of ethical investment? Is it about to reach saturation point?

JP: I believe there are no limits on the potential for growth of ethical funds. In my view, we will gradually evolve into a much more intelligent species and succeed in living sustainably. Every financial product out there on the market will be ethical and sustainable. That’s what our economy will be. I’m an optimist, so perhaps even in 10 years’ time it won’t be considered niche or ‘ethical’ any more – it will be the new mainstream.