Southland District Council was expected to save millions of dollars after it voted for the Local Government Funding Agency as a guarantor last month.
The funding agency was established in 2011 and enabled local authorities to borrow at a lower interest rate.
Under the funding agency, the council was required to have an investment policy and a liability management policy.
When discussing the policy at a district council meeting on Wednesday, councillor Darren Frazer stressed the importance of making ethical investments.
The joint policy stated the council would avoid direct involvement with industries that had a negative impact on society and the environment, including alcohol, tobacco, military and weapons.
Cr Frazer said there was one vital element which was not included.
"We need to make sure we’re not investing in places that have poor labour practices."
The environmental impact of investments also needed to be considered.
The policy was adopted after the amendment was made to avoid direct involvement with industries which participate in labour exploitation.
