Cazenove, whose five common investment funds reached a combined total of £1bn of charity investments last month, has had particular success with its hedge fund CIF, the Absolute Return Trust for Charities. The firm told Third Sector that a socially responsible CIF may be its next initiative.
"This is blue-sky thinking at the moment," said Jeff Hayes, head of institutional and charity clients at Cazenove Capital Management. "We are increasingly seeing from some of the more ethically driven charity clients that trustees want to be more ethical than they have been in the past and exclude or restrict sectors of the marketplace, such as alcohol and arms."
Hayes added: "The environmental issue is not going to go away. It's growing. Historically, we have engaged management to try to get businesses to be more ethical, but we increasingly see that charities are wanting to go further than that."
Sam Collin, charity adviser to a project run jointly by the Ethical Investment Research Service and the UK Social Investment Forum, welcomed the idea of an ethical investment facility for the sector.
Collin said: "Our research has shown that the range of CIFs that currently cater for charities wishing to invest ethically is limited.
"Many charities would like to invest in line with their missions, but find it difficult to find investment funds that meet their ethical and financial objectives."