The Accident Compensation Corporation has denied directly investing money in weapons and munitions, saying it is committed to ethical investments.
It was revealed on Monday that a collective investment vehicle, of which the ACC was part of, had purchased shares in US company Lockheed Martin in July last year.
Lockheed Martin, as a weapons and munitions producer, is on ACC's direct investment exclusion list.
The Green Party, who uncovered the investment in an Official Information Act request, says it's time National takes responsibility for ensuring government funds don't end up in companies that profit from manufacturing illegal weapons of war.
"These weapons blow innocent kids' legs off and it's time the Government set up strong rules about profiting from investments in the companies that make these weapons," Green Party finance spokeswoman Julie Anne Genter said, calling for basic ethical investment standards.
The ACC said it identified the collective investment, by South Africa's Orbis Investment Management, in December last year, and took action.
Four other companies, also on the ACC's direct exclusion list, were also indirectly invested in, it said in a statement.
"While the shares were purchased through the secondary market and the pooled funds used would have gone to the previous owner of the shares and not Lockheed Martin we asked that Orbis sell down the investment," the statement said.
"Orbis has agreed to set up a separate pooled fund that is consistent with ACC's Ethical Investment Policy."
The new fund is expected to be in operation by December.
It's the second time this month that a government organisation's investments have been called into question.
Some default KiwiSaver providers have been revealed to have invested in companies which don't meet ethical criteria, including Lockheed Martin, Northrop Grumman, Fluor Corpo and Honeywell International.
The investments were made through Australian fund manager Vanguard, which also put money into tobacco.
Prime Minister John Key said at the time he didn't think the problem was big enough to merit changes.
But Amnesty International on Monday filed a complaint with New Zealand Police calling for an investigation into the KiwiSaver investments.
"There is no acceptable justification for investing our savings in cluster bombs, landmines and nuclear weapons," Amnesty International New Zealand executive director Grant Bayldon said.
"Given that all the providers have not immediately divested, we have laid a complaint with the police against the KiwiSaver managers who continue to hold these investments."