This paper examines the performance and investment style of ethical mutual funds using an international database of 103 German, UK, and US ethical mutual funds. The authors apply a multi-factor model, including size, book-to-market, and momentum effects, to overcome the benchmark problem common in previous studies. They find no significant differences in risk-adjusted returns between ethical and conventional funds over the 1990-2001 period. Ethical funds exhibit distinct investment styles, such as being less exposed to market return variability and having a higher proportion of small-cap investments in Germany and the UK, while US ethical funds invest more in large caps. The study also suggests that ethical funds underwent a catching-up phase before achieving financial returns similar to conventional funds. Additionally, the performance estimates are robust to the inclusion of ethical indexes, which do not significantly improve the explanation of ethical fund returns. The findings indicate that ethical mutual funds have comparable financial performance to conventional funds, despite their ethical constraints.This paper examines the performance and investment style of ethical mutual funds using an international database of 103 German, UK, and US ethical mutual funds. The authors apply a multi-factor model, including size, book-to-market, and momentum effects, to overcome the benchmark problem common in previous studies. They find no significant differences in risk-adjusted returns between ethical and conventional funds over the 1990-2001 period. Ethical funds exhibit distinct investment styles, such as being less exposed to market return variability and having a higher proportion of small-cap investments in Germany and the UK, while US ethical funds invest more in large caps. The study also suggests that ethical funds underwent a catching-up phase before achieving financial returns similar to conventional funds. Additionally, the performance estimates are robust to the inclusion of ethical indexes, which do not significantly improve the explanation of ethical fund returns. The findings indicate that ethical mutual funds have comparable financial performance to conventional funds, despite their ethical constraints.