Future Fund clash over tobacco laws

In a move that has sparked criticism from health groups, the fund's stake in tobacco companies has swelled by about 50 per cent in recent years to $210 million at June 30.

Until now, the fund has not said if it had been buying more stock or if the shares had risen in value. But now the fund has revealed its managers bought more shares in tobacco companies before February.

In response to questions put to the fund in May, it has said that $37.8 million of the $78 million increase in its tobacco holdings between December 2010 and February this year was driven by increased buying. Share price and currency movements accounted for the remaining $40.2 million of the increase, the fund said in response to a Senate estimates question.

The purchases occurred while the federal government was passing legislation for its plain-packaging rules, which will require cigarette branding to be replaced by a drab packet with graphic health warnings from December.

In response to its critics, the Future Fund argues the tobacco investments do not breach its internal policies, as cigarettes are legal. But with the $77 billion fund also investing millions in nuclear arms companies, the Greens have proposed ethical investment rules for the fund a position rejected by Labor and the Coalition.

Greens senator Richard Di Natale said it was "incredibly disappointing" the government refused to intervene in the issue.

"The government must take some responsibility for the fact that the fund is investing in an industry which is essentially doing all it can to thwart government policy," he said.

Finance Minister Penny Wong said in August that it would be "inappropriate" for a government to intervene in investment decisions by the Future Fund, which is independent of government.

Senator Wong argued that breaching the fund's independence could set a precedent for "rather odd" outcomes, such as politicians who were sceptical of climate change science preventing the fund from investing in renewable energy.