"It is ironic, absolutely. Some great benefits could be achieved by working with and pressurising companies," said Simon Baker, head of Jupiter Asset Management's Green Department, which advises the ethical investment managers.

Ethical investment funds' criteria vary but many only invest in companies with a clear commitment to beneficial environmental and social policies.

But they can only put money into companies which provide enough information for assessment, said Lee Coates, director of the UK-based Ethical Investors Group

"If a manager has any doubt about the activities of a company, he will not invest in it. It's more lack of information than anything else," he said.

BAPTISTS INVEST

In the nineteenth century, ethical funds were run by the Baptist church and other religious bodies, but the first modern British fund was founded in 1984.

The British sector has boomed and now controls around four billion pounds ($5.87 billion) and had doubled in value since 2000, Coates said.

U.S. funds - which control about 90 percent of the world's ethical investment portfolio - hold $2.03 trillion.

Calpers, the largest U.S. pension fund, grabbed headlines in February by pulling out of four southeast Asian countries, saying they did not meet standards, including on human rights, for investment in emerging markets.

Most ethical fund managers steer clear of the opaque emerging markets.

"As more investors move in the transparency will improve. But we're less into that area; that's an area of the future," said Andrew Preston, fund manager for Aberdeen's Ethical World Fund.

Ted Scott, director of Friends Provident's stewardship fund, said that of the 1.3 billion pounds the company's ethical funds controlled, only 50 million was invested outside the UK.

"People prefer to invest in their own countries from an ethical standpoint. In a fund which invests on a global basis the developed markets such as the U.S. are favoured because of their lower volatility and greater liquidity," he said.

The money invested outside the European Union, North America and Japan went to Australia and other developed Asian economies. Developing markets were less liquid and more volatile, and less was known about them.

"The research and the fund management required for such a broadly diversified fund would make it difficult to justify," he said.

He also said developing markets had an image problem, and that many of them either had or were seen as having oppressive governments.

"Emerging markets are considered less ethical with labour practices being an area of particular controversy," he said.

The issue of ethical investment came to the fore last week when credit rating agency Moody's Investors Service withdrew its rating on Iran because of concern that investigations needed to to keep the rating up to date might be inconsistent with U.S. sanctions against Iran.

U.S. President George W. Bush has said Iran is part of an "axis of evil", which also includes Iraq and North Korea, and U.S. firms are not allowed to do business there.

CHECKING UP

Preston said Aberdeen sent out inspectors to check and advise on companies' activities when not much information was available.

"It's not critical for some of the big blue chips but for the middle area of smaller companies which are not so fully transparent, you need to visit them," he said.

He said his fund had about seven percent of its investments in developing economies.

"I wouldn't say it's easy, you need good people to do research," he said.

But Baker said ethical funds were not yet large enough to have any kind of persuasive impact on large businesses in the developing world.