The Green Party has called for a council to quit membership of a pension fund unless its managers adopt a more ethically sound investment policy.
Green councillor Pete West said the fund used by Brighton and Hove City Council should stop investing in the tobacco and arms industries and some multi-nationals.
His call follows a report in The Argus which revealed the East Sussex Pension Fund invested in many companies that had been criticised by trade unions, environmental and human rights groups.
Councillor West expressed his concerns in a letter to council leader Ken Bodfish and chief executive David Panter.
He said many of the fund's investments were at odds with the council's own policies and rules on ethical investment.
He said Brighton and Hove could not, for example, honestly say it was a Peace Messenger City while its fund invested in arms manufacturers.
He said: "We urgently need to review where our pension fund is being invested and make changes necessary to ensure the city's fundamental principles are not compromised.
"It is wholly inconsistent for the council to say it is working to reduce global warming while investing in major polluters."
Senior Labour councillor Brian Fitch has also called for the fund to stop investing in controversial companies.
The £1 billion fund represents local authorities throughout East Sussex.
Brighton and Hove City Council is one of its biggest members.
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