The environment and humanity are among the latest drivers for those with enough cash to invest.

Shareholder activists are increasingly influencing corporate Australia's decision making on matters such as executive pay and returns.

Rio Tinto's chief executive was last year forced to step down following an investor backlash, after the global miner blasted some of the world's oldest Indigenous heritage sites in Western Australia.

Financial services giant AMP faced a similar situation, losing its chairman and two top executives after criticism from major shareholders over its handling of a sexual harassment claim.

More investors are focusing on ventures that generate positive social outcomes, and avoiding those that harm the environment or community.

"Taking the approach of long-term shareholders, we find systemic risks like climate change will have a negative impact on performance of companies in your portfolio over time," says Brynn O'Brien, executive director at shareholder advocacy group the Australasian Centre for Corporate Responsibility.

"We're trying to use our power as shareholders to mitigate these risks. We think that is the best approach to ensuring financial stability and long-term shareholder value."

Financial imperatives drive much of this behaviour. Analysts cite the declining performance of fossil fuel stocks over the past seven years as an example of how environmental risks impact companies' market value.

In a broad study last year, global fund manager Fidelity International measured investment returns of more than 2600 companies between January and September - at the peak of the COVID-19 pandemic.

It found companies at the top of the ESG rating scale easily outperformed those with weaker ratings, particularly during periods of sharp volatility.

The clear stronger performance has helped fuel the growth of socially-responsible investing in Australia.

Industry body Responsible Investment Association Australasia (RIAA) estimates responsible investment funds account for 37 per cent of the $3.155 trillion in professionally-managed assets in Australia, nearly doubling in value in five years.

Last year, ESG-focused fund manager Australian Ethical Investment was among the best performers on the ASX, lifting its value by 40 per cent. Other strong performers in the segment included exchange-traded funds by Vanguard, Betashares and Van Eck.

Sustainable investing is also finding its way into other segments of financial markets as investors seek companies that align more closely with their values.

Rising demand from their members has pushed some of Australia's largest superannuation funds such as HESTA, Australian Super, Cbus, and REST Super to the forefront of seeking change at companies, especially on matters related to climate change and sustainability.

The trend has spread to the private equity sector, with large fund managers and wealthy sophisticated investors looking to invest in start-ups that target big unmet environmental and social needs.

"Recent disasters such as the pandemic and NSW floods and bushfires have led more investors even further towards socially-responsible investing," says Geoff Waring, partner at Stoic Venture Capital, which funds early-stage businesses arising from university research.

"Investors want to know that their money is working towards positive social goals and are seeking more rigorous reporting from companies about how they achieve those goals."

Australian Associated Press