Auckland Council is pulling out of one of its investment funds because its manager will not say if it owns shares in companies that make prohibited munitions, such as cluster bombs and mines.
Last month RNZ found the council's investment in the Jan Global Research Fund had shares in British American Tobacco and The Coca-Cola company, appearing to contradict the organisation's ban on smoking and sugary drinks.
The council had investments worth $224 million in 11 different funds, after divesting $100m last month as part of a planned withdrawal.
Auckland Council chief financial officer Sue Tindal said its decision to pull out of the Janus fund was not because it invested in tobacco or sugary drinks, but because it could not confirm that it did not invest in companies that made cluster bombs, mines or nuclear weapons.
"Given we are unable to confirm whether our fund investments with Janus are legally compliant, the council decided to divest from the fund," she said.
The divestment would take place over the next month, she said.
"Once the divestment of the Janus Global fund is complete, we can categorically state that we are compliant and have no funds invested in cluster, nuclear or other prohibited munitions.
"The decision to divest this fund was due to Janus being unable to confirm, to our satisfaction, that equities within their global fund were not involved in these activities in any way. All other fund managers have provided appropriate confirmation of compliance," she said.
Ms Tindal said it would be up to the new council to decide whether to stop investing in tobacco or sugary drink companies.
"Investing in companies such as Coke and British American Tobacco, while not illegal, may not be consistent with council's operational approach on sugar laden drinks and the smoke free policy. Therefore, we will still plan to bring a paper to the incoming council to resolve this aspect of the investment policy. We have undertaken to do this early in the new term."
Councillor Chris Darby said he would be pushing for the new council to get rid of all investments in tobacco and sugary drink companies.
"We have a smoke-free policy and Auckland Council in its facilities is reducing the availability of sugary drinks in its dispensing machines and its cafes. It's at odds with all of that work that we're telling our communities that we're doing to be secretly investing Coca-Cola or British American Tobacco," he said.
A spokesperson from the climate change lobby group 350 Aotearoa, Niamh O'Flynn, applauded the move, but said it was time the council treated its fossil fuel investments in the same light.
"They're trying to lead the way on climate change, but science tells us that we cannot burn more fossil fuels and we cannot certainly dig up any more fossil fuels, so it's really important for their consistency, to divest."