Responsible investment is capturing a greater share of the market and forcing change in corporate and government behaviour, according to a new report.
The biennial Global Sustainable Review showed that more than a third of funds under management globally were in sustainable based investments, having risen 15 percent over the past two years to be worth $US35 trillion worldwide.
Responsible Investment Association of Australasia chief executive Simon O'Connor said the trend had grown and was reshaping the investment sector.
"This growth is being fuelled by rising consumer expectations, strong performance and the increasing materiality of social and environmental issues - from biodiversity to racial equity to climate change."
Government moves to set climate change and carbon reduction targets and regulator demands for disclosure on the financial impacts of such issues were forcing investment managers to change, as were growing demands for more ethical investment from consumers, O'Connor said.
Attempts by firms to greenwash their funds - painting them as more ethical and responsible than they were - have been knocked back by regulators, such as the Australian Securities and Investments Commission.
The New Zealand Financial Markets Authority has also issued guidance on responsible investment products, and the government has required default KiwiSaver funds to exclude fossil fuel producers and illegal weapons.
O'Connor said his organisation had also raised the bar for firms wanting to have their investment funds rated as sustainable.
"We do refuse fund managers from products that don't meet our standards and we also have a really strong ability to lift the standards, for example, only 25 percent of the products that come to us for certification make it through certification without too many changes."
Consumers were also increasingly judging funds not by their words, but their deeds and how they matched up to the Paris Agreement and other benchmarks, he said.