The council’s audit and risk subcommittee this week agreed to an updated policy that excludes nuclear power, thermal coal, oil and gas, and some gambling and alcohol operations from council investment.
Cr Kate Wilson said dropping fossil fuels had been a "long time coming" for the council.
To continue to profit from those companies presented a reputational risk.
She said she took comfort from conversations with financial advisers who said there would be "very little financial effect".
"This is a financial investment, but we are an environmental body.
"We have to be seen to be doing our best."
While the subcommittee decision was ultimately unanimous, Crs Kevin Malcolm and Alexa Forbes briefly sparred over whether all fossil fuel companies should be excluded, or whether a threshold was appropriate and only those companies that derived a certain amount of their total revenue from fossil fuels should be out.
Cr Malcolm said there were companies that were moving in the right direction that would be targeted by the policy.
He said there were companies in the Moeraki constituency that were transitioning away from fossil fuels, but had been stymied by a lack of infrastructure available in the towns where they were set up.
"They are waiting on the technology to do it — and this is major manufacturers," Cr Malcolm said.
"There are companies that will take time to do that."
Cr Forbes said she would prefer to invest in those companies once their transition was complete.
"I would like us as a council to be able to stand up and say that we have divested all of our investments in those companies."
Cr Lloyd McCall said he "definitely" agreed with divesting from fossil fuels, but had his doubts about whether it was appropriate to exclude gambling, or alcohol producers.
"We’ve got to be really careful where we draw the lines," he said.
