Horsfall, who manages the F&C Stewardship International fund, said that the financial crisis has highlighted the need for corporate governance, and the genuine investment risks that comes with investing in companies that have no conscience.
"A strict screening process has in the past been seen as holding back ethical funds, but during the financial crisis it has held many in good stead", she said.
"Increased corporate governance has allowed ethical funds to filter out companies that are not analysed by the broader market. BP has never made it through our screens due to health and safety issues."
"This has clearly had a benefit for us. I think the crisis has made investors more aware of the genuine business risk that some of these companies have. The screening process doesn't necessarily make ethical funds immune from poor performing companies, but I think the public has seen the benefits of our process."
There has clearly been an increased demand for ethical funds in recent months. Net retail sales hit £74m in the third quarter this year, 25 per cent up from the same period last year. Penny Shepherd, chief executive at UKSIF said that despite these positive figures, there is still a huge unmet demand for modern green and ethical investment options.
She said: "Although only 8 per cent of savers and investors currently hold green and ethical investments, a further 37 per cent say they will consider doing so in the future."
As Financial Express data shows, Horsfall's fund has outperformed its Global Growth sector by 2.69 per cent in the last three years.
Performance of fund vs sector over 3-yrs
Source: Financial Express Analytics
Horsfall added: "I think ethical funds have demonstrated through the cycle that they can deliver above average returns. There has always been a perception that ethical funds are long term underperformers due to there restrictive nature. However, they have shown consistently that this is not the case."
However, managing director of Nexus Independent Financial Advisers Kerry Nelson was not convinced that investors have bought into that idea.
She said that even if ethical terms did outperform their sector averages, they were still held back by their lightweight reputation.
Nelson said: "I have only ever had one client ask me about ethical funds. Though I agree with their moral principles, my clients want to make money without restrictions. This is a very ruthless industry, and so personally I don't recommend them."