Nacro is to sell its shares in arms company BAE Systems in a move to preserve an ethical policy.
The charity was named as holding 1,000 shares in the company, one of the biggest arms firms in the world, in a report last week by the Campaign Against Arms Trade. Other charities listed in the report included Cancer Research UK, the RNLI and the MS Society.
But Nacro says the shares were left it in a legacy several years ago and it does not want to benefit from unethical investments.
A spokeswoman commented: "Nacro does not invest in the stock market. All the shares that we hold have been donated and this particular holding is very small, with only 1,000 shares. We do not wish to hold shares that are unethical and our intention is to sell them as soon as possible without making a loss."
She added: "It is unfair to compare Nacro to larger charities when we don't actively invest in the stock market and hold only a tiny amount of shares."
The Campaign Against Arms Trade welcomed Nacro's decision. CAAT is running a 'clean investment' campaign which is aimed at persuading local authorities, universities, NHS trusts, trade unions and charities to pull out of arms investments.
A spokesman said: "We are delighted and would encourage other responsible charities to follow Nacro's lead.
"Charity donations should be used for positive and progressive purposes, not harmful ones like the manufacture of weapons.
"It is entirely appropriate that a charity that works to rehabilitate offenders should not assist with the manufacture of weapons."
See News in Focus, p12.