The Future Fund has defended its investments in subsidiaries based in known tax-havens during a senate inquiry yesterday.

The fund's 2011 annual report shows that it has 14.4% of its assets in the Cayman Islands, plus significant investments in the British Virgin Islands and Jersey, and smaller investments in Luxembourg.

The fund asserted its independence at yesterday's inquiry - defending itself against a bill put to Parliament by the Greens which would see it forced out of several contentious investments.

The Greens' 'responsible investment' push would force the Future Fund to pull out of profitable holdings in several Tobacco manufacturers, and those companies involved in the production and development of nuclear weapons.

"Properly structuring its investments can be essential to maintaining the board's rights and entitlements, including the benefit of sovereign immunity for tax purposes in certain jurisdictions," the Future Fund stated yesterday.

Several groups have made submissions to the Greens-driven proposal to amend Government Investment Funds Amendment (Ethical Investments) Bill 2011.

The companies that the Future Fund invests in are not producing, "paperclips, dual-use items or things that are not specific to nuclear weapons or their delivery systems," said associate professor Tilman Ruff, in his testimony to the inquiry.

"These are companies that are integrally involved in the production of key nuclear weapons and delivery system components," said Rush - chair of the International Campaign to Abolish Nuclear Weapon's Management Committee.

Rush said the largest of these was Honeywell, an American conglomerate with a significant Aerospace & Defense arm.

If the Greens' Bill is successful the future fund has warned that it will have to revisit its risk and return calculations, which could see diminished returns.

The Future Fund has investments in 15 tobacco manufacturers that totaled $225 million as at May 2012, as well as $135 million in nuclear weapons manufacturers.

Yesterday the Future Fund said that one of the key principles of the fund is independence; however responsible investment was already a key part of its highly structured investment process.

The fund also stressed that none of its investments contravened existing OECD treaties.