But students are lukewarm on the idea, saying that although the policy was a small step in the right direction, it was mainly a PR exercise to deflect rising unease about the extent of the ANU's investment in fossil fuels. It did not commit the university to phasing out investments directly contributing to climate change.

Council approved on Friday the new "Socially Responsible Investment Policy" which aims to "avoid investment opportunities considered to be likely to cause substantial social injury", and "positively promote investment in securities, companies, trusts and other entities that support socially beneficial outcomes."

ANU Chancellor Professor Gareth Evans said that the criterion of substantial social injury was modelled on that used by Stanford and Yale Universities – and was considered "gold standard".

"While the policy provides guidance on what assets should and should not be held in the university's investment portfolio it also recognises our fiduciary responsibility to maximise returns, diversify risk and ensure funds are efficiently managed," Professor Evans said.

"It helps us balance social responsibility and leadership with our financial responsibility to staff and students to ensure ANU investments generate strong returns."

He noted the policy also required the university's investment advisory committee to report each year to Council on compliance and to take into account any submissions it received from the ANU community with the first report due by July.

But the policy has left students lukewarm with the vocal Fossil-Free ANU group saying it was vague and avoided using true examples of gold standard socially responsible investment policies in the higher education sector.

Postgraduate climate change policy and economics student Tom Swann said the ANU would do better to follow the lead of six United States universities which have committed to getting out of coal investments altogether.

The group has been a vocal opponent of the ANU's investment strategy, which they say has tied up about $80 million in some of the world's largest fossil fuel producers.

Mr Swann has fought a long-running Freedom of Information battle with the ANU over its investments, revealing earlier this year that after divesting from Metgasco due to environment concerns, the ANU bought new shares in Santos, a coal seam gas leader.

"We are happy that the ANU realises this has the potential to be a major issue for them, and they are trying to get on the front foot. But they should have been more committed to the issue, and it is pretty clear that to avoid social injury you should tackle climate change," Mr Swann said.

He said it had been raised during Council's deliberation that ANU students had no direct access to Council members and sitting on the observer benches during the meeting on Friday, Mr Swann said "it was very clear some of the Council members had not engaged with the material specifically prepared for them on this issue".

Mr Swann conceded the university was in a difficult financial position, currently having to budget for $51 million in Labor Government funding cuts this year, but he believed it was possible for the ANU to preserve its investment potential while divesting from all fossil fuel companies.

The policy does recognise the potential for future divestment, noting "where the university determines, pursuant to this policy, to reduce its investment in an existing company or asset, the liquidation of that asset should be timed to avoid any adverse impact on the university's overall investment position and the university may decide to phase out of a particular asset over a period of time. In such cases, the progressive winding back of such an asset will be monitored and periodically reported."

Mr Swann said "If the Chancellor wants ANU to be an Australian leader then they need to do this and genuinely make climate change a priority...They've passed the buck on decisions about what it will actually achieve and eventually they'll have to face up to the damage caused by fossil fuels - to our health, our land and our climate."

"As we've tried to show Council a numbers of times, there's lots of evidence going fossil free doesn't actually hurt returns, and lots of unis and cities are already going fossil free. We're going to keep working until ANU is one of them."