The retirement fund for NSW local council workers has dumped ANZ Bank and Commonwealth Bank shares from one of its responsible investment options, citing concerns about corporate conduct after a run of scandals in banking.

Local Government Super said it divested $2.8 million worth of ANZ and CBA stock from its Sustainable Australian Shares investment option after new screening processes were introduced specifically for financial services firms.

Chief executive of the fund, Peter Lambert, said the decision reflected concerns about the banks' corporate behaviour and their "social obligations", as well as the potential investment risk from fines over scandals.

Mr Lambert believed it was a first for an Australian super fund, but said moves such as this may become more mainstream, as divesting from fossil fuels has.