ANZ is in talks with the world's largest fund manager about creating a passive investment fund that does not have any exposure to tobacco or weapons, the bank says.
ANZ - the country's biggest bank - announced last month it would divest from all direct investments in such companies, after RNZ found KiwiSaver providers had millions of dollars invested in them.
ANZ said only its conservative default Kiwisaver fund invested passively in tobacco and weapons, through a fund managed by BlackRock.
The bank was considering creating its own mandate with BlackRock to exclude tobacco and weapons, but was also talking to its competitors - including Vanguard - about other options, an ANZ spokesperson said.
Many banks and KiwiSaver providers invest in Vanguard funds to gain exposure to international shares.
Vanguard has been placed under intense pressure to come up with an alternative investment that excludes controversial companies, and is working to create a new product tailored for the New Zealand market.
ANZ said it hoped to make an announcement about its indirect investments in the next few weeks.