Wandsworth Council has been accused of unethical financial management after campaigners revealed it had shares in three British arms companies.

Figures from the Campaign Against the Arms Trade (CAAT) showed Wandsworth holds 156,364 shares in BAE Systems, which makes everything from fighter aircraft to missiles ,and 202,578 in Rolls-Royce, one of the world’s largest military engine suppliers.

The council, which confirmed it had a substantial amount of shares in the two companies as part its pension fund holdings, admitted it had also invested in GKN, part of a consortium which produces military helicopters.

The figures were highlighted as CAAT publicised its Clean Investment Campaign by listing every council’s and public limited firm’s shares in the seven British defence firms, among numerous protests against the Defence Systems Equipment International arms fair held in Docklands this week.

A council spokesman said the investment managers for Wandsworth’s pension funds – currently facing a £70million black hole – were ultimately responsible to the general purposes committee for having socially responsible investment policies for the thousands of the council’s pensioners.

He pointed to Wandsworth’s statement of investment principles – a statutory requirement since the 1995 Pensions Act – which says the council’s “permanent fiduciary duty [is] to obtain the best possible financial return on the fund investments against a suitable degree of risk”.

But he admitted Wandsworth had not joined an ethical share scheme like nearby Kingston and Croydon, which while still holding shares in arms companies, had set aside pension funds for specifically non-arms and non-tobacco companies.

Disclose Bruce Mackenzie, from Wandsworth Green Party, said the group had written to council last month asking it to fully disclose any holdings in arms companies but had received no reply.

“It is public money that is involved and [Wandsworth] must be open about it.

“We recognise the fact that they need to invest to secure pension returns but we suggest that with the extent of conflicts and suffering round the world, they should put their investments into socially beneficial and benign shares and companies.” Wandsworth Labour leader Councillor Tony Belton, who has long pressed for an ethical share portfolio, added that many ethical funds had made financial returns above the market average as shareholders rushed to invest in them.