The aviation industry has hit back at the decision by Standard Life Investments to cease investments in airline sticks from its ethical funds, accusing it of double standards and relinquishing its ability to help improve airlines' environmental performance.

The investment firm said yesterday that its ethical funds would no longer invest in airline stocks after its annual survey of ethical investors' concerns revealed 30 per cent would prefer airline stocks to be excluded from the funds.

The International Air Transport Association (IATA) criticised the move claiming the sector had been unfairly singled out by Standard Life and that the decision ran counter to the wishes of 70 per cent of its investors.

IATA spokesman Quentin Browell said that the survey had failed to ask investors about whether or not ethical funds should invest in other sectors responsible for carbon emissions and noted that the majority of respondents had claimed that the majority of respondents were happy for Standard Life's funds to invest in airlines that are environmentally responsible.

Julie McDowell, head of SRI at Standard Life, countered that the aim of the ethical fund was to reflect as many investor concerns as possible. She added that having almost a third of respondents objecting to airline stocks represented a significant percentage that the fund's ethical committee felt should be accommodated.

Browell insisted that the aviation industry was investing heavily in improving its environmental performance and argued that investors that have concerns about its carbon footprint would be best served by continuing to invest in the sector. "The most effective way to drive things forward is to invest, become shareholders and go to the meetings," he argued. "We would welcome any shareholders who want to hold airlines to high environmental standards."

But McDowell insisted that whether ethical investors wanted to try and influence airlines activities as shareholders or shun the sector altogether was an "individual decision", adding that Standard Life had given them the option to avoid airline stock if they wished.

Standard Life's move again highlights the debate over investors' role in carbon intensive sectors, with some ethical funds insisting polluting firms should be avoided and other investment groups arguing they can better aid the transition to a low carbon economy by investing in carbon intensive businesses and insisting they embrace green best practices.

Earlier this week three leading banks, Citi, JP Morgan Chase and Morgan Stanley, sought to establish clear guidelines for this later approach, signing up to principles governing energy investments that allow them to continue to invest in fossil fuel-based firms but only where certain environmental criteria are met.

In related news, the EU yesterday launched a new €1.6bn public-private partnership with several of the aviation industry's biggest names designed to improve the fuel efficiency of new aircraft.

Airbus, Dassault, Saab and Rolls Royce have all signed up to the Clean Sky Initiative, which aims to cut carbon dioxide and nitrous oxide emissions by 40 per cent through innovations such as "smart wing" design and lighter aircraft frames.