A recent Corporate Watch Australia survey reveals that many so-called ethical investment funds invest in uranium mining.

The number has risen significantly in recent years. Some fund managers justify investment in uranium with questionable arguments about nuclear power and climate change, but the primary reason for the shift is probably BHP Billiton's entry into the uranium industry with its 2005 acquisition of WMC Resources, which owns the Olympic Dam uranium mine in South Australia.

Of 16 ethical investment funds studied, just two allow absolutely no investment in uranium or nuclear power. The rest either have no policy on the matter or allow limited investment in the nuclear industry - for example by allowing investment only in companies that get below a certain percentage of their income from uranium, or ruling out uranium mining but having no policy on other parts of the nuclear cycle.

Ethical investment is booming: from its origins in 1984 with a fund nicknamed 'Brazil', because you'd have to be nuts to invest in it, the sector is now worth $2 trillion worldwide. According to the Responsible Investment Association of Australasia, Australian responsible investment portfolios grew from $4.5 billion to $17.1 billion from 2004 to 2007.

However, this rapid growth is accompanied by a crisis of definition and a dilution of its original principles. The concept 'ethical investment' is vaguely defined: fund managers make their own rules, and their definitions of 'ethical' vary. The sector is now more commonly called 'Sustainable and Responsible Investment'. In Australia it is represented by the peak body, the Responsible Investment Association of Australasia (RIAA), which manages the national certification program for responsible investment providers. Certified companies can display RIAA's 'Responsible Investment' symbol. However, there is nothing to stop any fund calling itself ethical without going through the certification process, and they frequently do.

Many ethical investment funds use an approach known as 'best of sector'. This means they do not rule out investing in any legal industry, but instead seek investment in companies that claim to be trying to improve their ethical practices. A sector cannot be ruled out on the grounds that it is simply wrong - if a company can show that it is making some gesture, however tokenistic, to improve its practices, it can be included in an ethical portfolio.

Some fund managers rule out investment in companies that get more than 5 per cent of their revenue from uranium mining or nuclear power. This approach means that AMP's ethical portfolio can still include shares in BHP Billiton and Rio Tinto - the world's fifth and third largest uranium miners respectively.

Several fund managers that invest in nuclear power cite climate change as a reason. However, little effort is made to justify the claims or to address counter-arguments. There is no attempt to refute the significant, growing body of scientific literature that demonstrates how the expansion of renewable energy sources, coupled with concerted energy efficiency programs, can generate major reductions in greenhouse emissions without recourse to nuclear power.

Nor have most fund managers addressed the ethical problems associated with uranium mining and nuclear power. The uranium mining industry has a poor track record in its dealings with Aboriginal communities - failing to consult traditional owners, using divide and rule tactics, and ignoring sacred sites. In the words of Yvonne Margarula, Mirarr senior traditional owner in the Northern Territory: "Uranium mining has ... taken our country away from us and destroyed it ... Mining and the millions of dollars in royalties have not improved our quality of life."

Similar patterns of 'radioactive racism' are evident in the management of by-products of the nuclear cycle. North American activist Winona LaDuke told the Indigenous World Uranium Summit in 2006: "The greatest minds in the nuclear establishment have been searching for an answer to the radioactive waste problem for fifty years, and they've finally got one: haul it down a dirt road and dump it on an Indian reservation."

Another ethical quandry concerns the connection between nuclear power and nuclear weapons. No less than five of the 10 states to have produced nuclear weapons did so on the back of their 'peaceful' nuclear programs. Former US vice president Al Gore neatly summarised the problem in 2006: "For eight years in the White House, every weapons-proliferation problem we dealt with was connected to a civilian reactor program. And if we ever got to the point where we wanted to use nuclear reactors to back out a lot of coal ... then we'd have to put them in so many places we'd run that proliferation risk right off the reasonability scale."

While ethical questions are necessarily arguable, the nuclear industry has been repeatedly and comprehensively discredited. If the ethical investment market is to retain its credibility, it must employ more rigorous and more consistent ethical screens. Further, there is a clear case for regulatory reform to ensure more transparent disclosure of investment in controversial sectors such as uranium mining and nuclear power.

Frances Howe is a researcher with Corporate Watch Australia.