The Church's Joint Advisory Committee on Ethical Investment declared last week that, although it still had concerns about the marketing of breast milk substitutes in developing countries, Nestle's business was not "inherently unethical".
The decision gives the green light to the church's investment agency, the central finance board (CFB), which has funds of about £1bn under its control, to invest in the multinational, but it does not mean that an investment is imminent.
"We do not believe Nestle is perfect by any means," said Anthea Cox, co-ordinating secretary for public life and social justice at the Methodist Church.
"But we think the option of making a financial investment in the company will enable the CFB to press Nestle further than the church could achieve by other means."
The advisory committee recommended that the central finance board meet Peter Brabeck-Letmathe, chief executive and chairman of Nestle, and have annual meetings with senior executives to assess the company's record.
The committee held a consultation in November 2004 to consider the ethical suitability of holding shares in Nestle. Both the company and campaigning group Baby Milk Action took part in the process.
Cox added: "This is not a decision the committee made lightly. We are aware of Nestle's record and that, despite improvements, there are still some reported violations of the World Health Organisation code on the sale and marketing of baby milk. But companies are accountable to their shareholders - if the CFB invests, it will actively press the company, not only on the issue of baby milk, but in other areas as well."
Mike Brady, campaigns and networking co-ordinator at Baby Milk Action, said the committee's reasoning was ill-judged. "The committee's wish to engage with Nestle by investing church money cannot be welcomed as a positive contribution to the campaign," he said.
The Methodist Church has ended its self-imposed ban on investing in Nestle
The church declared that, although Nestle's business was not inherently unethical, it still has concerns about the company's marketing of breast milk substitutes
The central finance board of the Methodist Church controls about £1bn in funds.