NGS chief executive Anthony Rodwell-Ball said the divestment decision was made on moral grounds but could be justified on economic grounds.

This was because NGS "will actively seek replacement sources of earnings and growth in the market, such that our members' retirement outcomes will not be prejudiced by the decision".

The $7 billion NGS fund has 100,000 members including teachers in non-government schools and aged care workers.

Fund members concerned

The super fund for private school teachers has agreed to sell its small stake in Transfield

Mr Rodwell-Ball said there had been some angst among members about the treatment of asylum seekers.

"We've had two or three emails, we've a bit of activity on social media, we've had some calls into the contact centre and then we've had some direct engagement from members," he said. "Out of 100,000 it's probably couple of dozen members so it's tiny."

As a member-based organisation it was important to respond to their concerns, Mr Rodwell-Ball added.


"Why act? Because it's the right thing to do," he said.

Fairfax Media revealed last Tuesday that HESTA had sold its 3.5 per cent stake in the company, which was worth about $23 million.

HESTA said "social governance" issues would expose Transfield to increased risk of future litigation, which could harm its value over time. Transfield has denied any wrongdoing.

HESTA chief executive Debby Blakey said the $32 billion fund spent 18-months examining the issue. She has so far refused to release a detailed analysis of the findings.

It has also emerged that UniSuper, a $50.3 billion fund, divested last year.

National Tertiary Education Union general secretary Grahame McCulloch noted the divestment in a union newsletter in March.

"Members may be interested that UniSuper which had a small indirect exposure to Transfield Services (a company involved in refugee detention) divested itself of this holding for commercial reasons in late 2014," he wrote.


Mr McCulloch sits on the UniSuper board.

Divestment has becoming a lightening rod for the debate over whether there should be more independent directors on the boards of super funds.

Political pressure?

Questions have been raised over whether super funds are being pressured to quit companies for political reasons.

Financial system inquiry head David Murray said independent directors were "more likely to ask the right questions" if a board needed to pit hard-nosed economic decisions against ideology.

Unions have claimed credit for putting pressure on the funds to divest, although it appears a small band of activists may in fact have done much of the lobbying through a website called HESTA divest and via Twitter.

The federal government plans to introduce legislation requiring all super fund boards to have one third independent trustees, including an independent chair.

At present many non-profit industry and corporate funds operate on an equal representation model. While some already have already recruited independent directors, NGS Super has none at present.

The board draws half of its members from independent and Catholic school organisations (the employer representatives) and half from the Independent Education Union (employee representatives).

First State and Christian Super have agreed to blacklist Transfield.

A UniSuper spokeswoman would only say: "I can confirm that we don't have any shares in Transfield. We make a multitude of buy and sell decisions on many stocks every day."