Investing ethically is all the rage in the funds management industry.

With each passing day, more money is being taken from funds that don't believe in the importance of Environmental, Social and Governance measures and handed to those that have made it central to their investing and marketing mission.

While ESG is typically applied to listed corporations, the whole concept of ESG can become a lot more uncomfortable when it relates to the conduct of actual managers.

Institutions, including Australian super funds, are going to have to work out how to handle controversial situations with the firms they hire, whether their values align and whether it matters.

That can be complicated. Investment firms themselves would score well as ESG investments given they emit almost no carbon.

Their value is in their human capital. But those humans are capable of doing unpalatable things, and determining what sort of behaviour should be tolerated is not clear.

Read Jonathan Shapiro's full column here.