The Federal Government's multi-billion-dollar Future Fund has decided to get rid of its investment in tobacco companies, following a long campaign by the Greens and health groups.

The fund's chairman, David Gonski, says the decision was made after careful consideration by the board's governance committee over recent months.

"The board noted tobacco's very particular characteristics including its damaging health effects, addictive properties and that there is no safe level of consumption," Mr Gonski said in a statement.

"In doing so the board also considered its investment policies and approach to environmental, social and governance issues.

"As a result, the board determined that in this instance it is appropriate to exclude primary tobacco product manufacturers."

According to figures provided to a Senate hearing earlier this month, the fund's total investment in cigarette and tobacco companies was $221 million.

Greens senator Richard Di Natale, who has long campaigned for the fund to divest itself of tobacco company shares, says it is a welcome decision.

"Finally we've got an end to the hypocrisy of a government that does some very, very good work in tobacco control around things like plain packaging but continued to invest in tobacco shares," Senator Di Natale told ABC News Online.

He says the fund's managing director, Mark Burgess, phoned him before the announcement was made but would not put a timeframe on how long it would take to sell all tobacco shares.

"There are, I think, sound reasons for the divestment to be managed very, very carefully," Senator Di Natale said.

"He made it very clear though that this is now a policy of the fund, that the fund have made a very, very clear decision that they will no longer invest in tobacco holdings.

"It means that taxpayer dollars are no longer being invested in companies like British American Tobacco and Philip Morris."

It was revealed last year that the Future Fund had been buying more tobacco company shares at the same time as the Government was introducing plain packaging laws for cigarettes.

Heart Foundation spokesman Maurice Swanson says he is extremely pleased with the fund's decision and wants to make sure there is no repeat of the situation.

"We now urge the Federal Government as well as all state and territory governments to introduce firm policy to ensure that no taxpayer money is invested in tobacco companies moving forward," he said in a statement.

"Tobacco kills some 15,000 Australians every year, many of them from heart attack and stroke.

"If you smoke, you are at least twice as likely to have a heart attack and three times as likely to have a stroke."