Right-wing evangelical Christians are flexing their financial muscles and encouraging the faithful to put their money where their principles are in the lastest front in America's cultural wars.

Ten years ago "faith-based funds" were a tiny proportion of the US mutual fund market, with just $500m (£250m) under management. But today that figure has soared to $17bn (£8.5bn) and it's a growth story that's not likely to end any time soon. A research report from Packaged Facts, a US market research firm, says that 69.5 million Americans are "devoted to the evangelical lifestyle" and that "the current and still-growing societal and monetary clout of this cohort is impossible to ignore."

The largest of the funds appealing to the Christian right is the Ave Maria Catholic Values Fund, brainchild of Tom Monaghan, the so-called "Pizza Pope" (Monaghan founded the Domino's Pizza chain before devoting his energy to Catholic causes).

It has $600m in assets under management and it specifically excludes companies that fail to "take a pro-family approach to investing". That means they have no truck with firms "connected with abortion or pornography, or that offer their employees non-marital partner benefits". Pepsi's decision to provide healthcare coverage for unmarried couples resulted in it being dumped from the fund in 2004. Pharmaceuticals giant Eli Lilly suffered a similar fate last year.

Ave Maria funds are less stringent on other grounds, having no problem with, for example, arms suppliers. It also has holdings in oil group ExxonMobil and oil services firm Halliburton, two firms detested in the wider SRI (socially responsible investing) community. Whatever else one says about Ave Maria, however, one cannot fault the performance of its funds, most of which have outperformed the market as a whole.

There are other funds that espouse more overtly biblically responsible investing. The Centurion Funds champion "core Christian values", as do the LKCM Aquinas Funds. However, these funds are positively touchy-feely compared with "America's first pro-life, pro-family, biblically based mutual fund group" masterminded by Arthur Ally. Disillusioned by the mainstream ethical funds that were "just fronts for promoting a new age agenda", Ally set up the Timothy Plan family of funds in 1994. Their goal is to "recapture traditional American values", which means no messing about with companies that contribute to the "moral decline of our culture, through their involvement in abortion, pornography or active promotion of the homosexual agenda". Add in drinking, smoking and gambling, and you've got a fund with serious principles.

The fund's website contains a "hall of shame" of approximately 450 companies. Some of the names - Playboy and the more risqué Private Media Group - are obvious. Others - GlaxoSmithKline, Microsoft and Disney - are less likely examples of "cultural polluters". The fund is particularly scathing of media conglomerate Viacom, which it denounces for its alleged "anti-Christian vitriol".

The fund recently chastised car giant Ford for "promoting homosexuality over shareholder profits" and linked the company's record $12.7bn loss in 2006 with its sponsoring of a Gay Pride festival. Ally protested that the firm had "turned its back" on ordinary Ford drivers.

Like many ethical funds, the Timothy Plan isn't keen on Wal-Mart. It's not because of the retailer's anti-union policies - it is because of the chain's refusal to "hood" the covers of Cosmopolitan, one of the "most blatantly aggressive soft core pornographic magazines in America".

Ally and his wife were "shocked" to see the magazine in their local store. "We simply could not believe our eyes," he said. Such soft porn "has this country on a moral slippery slope. It's the initiation to hard core pornography ... and worse".

It may all sound a little loopy but Ally has his followers. The fund has more than $500m in assets under management - and he has bigger plans still.

"Research suggests that 45% of American adults are born-again", Ally writes. He implicitly accepts that this is a controversial figure - studies tend to show that some 25-45% of US citizens define themselves in this way, depending on how the question is asked - but goes on to say that, if true, "approximately 40 million Christians invest over $4 trillion in mutual funds. Once these Christians discover the collective power they can effectively have on corporate America ... companies like Ford will no longer disregard the concerns of their shareholders."

Annoyingly for Guardian-reading liberal types, he seems to know what he's talking about when it comes to stock-picking.

The Timothy Plan was the top-performing faith-based fund in the US last year. "Timothy's biggest fund, the Large/Midcap Value fund, returned more than 17% for the year and has averaged 18.6% a year for five years," stated a recent Financial Times article.

Pray silence in Europe

Fundamentalism rather than fundamentals may be the hallmark of some of the US faith-based funds. In Europe, however, things are much more low-key. The few funds of this type that do exist are more reluctant than their US counterparts to trumpet their values, with screening measures discreetly tucked away in the fund prospectus.

In the UK, Capita Financial administers the Real Life Fund. As the name suggests, the fund looks to invest customers' money in companies "which publicly profess their commitment to pro-life values [and] which supply the basic necessities of life. . ."

Investing primarily in the UK, the fund resembles a conventional ethical fund in many ways, steering clear of companies involved in the tobacco, gambling, alcohol and armaments industries.

A number of funds cater to Islamic investors. Sharia law dictates that Muslims avoid investments linked to the usual suspects - pornography, alcohol, tobacco and gambling. Manufacturers of pork products are also prohibited, as are financial services companies - Islamic law forbids the practice of usury, or what is more commonly known as interest payments.

In 2002, the Vatican was involved in the launch of a European index-tracking fund that mirrors Catholic values. Consisting of 150 stocks, it has reportedly seen strong interest from investors in Italy and Spain.