Labor wants religious faith to be taken into account when assessing a superannuation fund's performance.
Many Australians would like the choice to avoid certain companies even if they offer high returns, Labor financial services spokesman Stephen Jones said on Monday.
A substantial minority of Australians object to their money being invested in gambling, alcohol, tobacco or weapons, he told an ethical investment forum in western Sydney.
"The government's new system does not offer this choice," he said.
If elected, Labor would make the prudential regulator take into account religious faith before shutting down super funds for poor performance under the current "two strikes" rule.
"This would give APRA the flexibility it needs to allow faith-based super funds to continue to offer their members a low-fee way to invest their money in accordance with their beliefs," he said.
Under current rules, Mr Jones said members of Christian Super or Crescent Wealth could be forced into a fund that does not take into account their religious wishes or have to navigate setting up self-managed super.
For the majority of Australians, peace of mind comes in the simple form of high returns, he said.
"But for a large number of Australians that peace of mind also involves knowing that their money and their investment choices are helping to create a better world.
"Government should not be in the business of discriminating against those wishes."
The federal government's "your future, your super" laws aimed to make it easier to choose a better fund and save Australians from paying excessive fees on their money invested in the $3.3 trillion savings pool.
