Climate change, human rights abuses and animal cruelty are front of mind for investors, as ethical funds grow strongly.
The annual report by the Responsible Investment Association of Australasia, found that funds engaging in best-practice ethical investment had assets under management increase 28 percent to $142 billion last year.
That's more than twice the growth rate of the broad industry.
The association's executive for policy and standards, Nicolette Boele, said the proportion of funds now managed with best-practice responsible investment had grown to 43 percent.
"The proportion of New Zealand's investment managers practising a leading approach to responsible investment nearly doubled in 2020, to comprise nearly half of investment managers purporting to engage in responsible investing.
"This trend suggests the quality of practice in New Zealand is pulling ahead of the Australian marketplace, where only a quarter of investment managers are engaging in leading practice responsible investment," Boele said.
Investment managers with ineffective responsible investment policies and poor processes were being left behind, she said.
"The shift of capital is being fuelled by changing consumer expectations, increasing regulation, strong financial performance and the rising materiality of different social and environmental issues - from climate change to racial inequity."
"This is an industry in transition. There are rapid developments taking place across countries, regions and markets that are resetting expectations of both companies and investment managers," Boele said.
She said New Zealand was emerging as a leader in this area.
Boele said there was a mix of investors steering clear of industries on the decline, while others were being proactive.
"On one hand yes, there's some reaction around avoiding some of those sectors that just don't look like they're part of a clean, low carbon future, like coal, oil and gas.
"But there's also a really big effort trying to engage companies so that they can transition their strategies fast enough, and just be better low carbon, agricultural producers for example," she said.