Politicians said they were duty-bound to maximise returns on their members' money.
One warned there was a danger pension members could sue if trustees had not maximised returns.
The Herald reported yesterday that nine of Scotland's 11 Local Government Pension Scheme (LGPS) funds have more than £220 million invested in the tobacco industry and firms that produce arms despite Government guidelines that require ethical and social considerations to be taken into account.
Councillor John Patrick, chairman of Falkirk Council Pension Fund panel, said he was unaware the funds were invested in big tobacco and pledged to look into the matter.
A Dundee City Council spokesman said: "The Tayside Superannuation Fund does currently allow investment in tobacco companies. A report will be considered on this subject at a meeting in March."
Other councillors who lead panels overseeing funds said the investments would be discussed at future meetings.
Asked whether investments in tobacco were ethical, Councillor Barney Crockett, convener of the Aberdeen City Council Pensions panel, said: "It is not up to us. We have to return the best for the pensioner.
"We are in a quasi-trustee relationship and pensioners could sue us if they felt we weren't getting the best return."
Councillor Bill White, chairman of the committee overseeing the Scottish Borders Pension Fund, said: "If you try to invest ethically you start to restrict what you invest in. By making that restriction you increase the investment risk."
Highland councillor David Fallows, head of the council pension fund's overseeing body, said: "I don't know we have that much control over what our investment company actually does, in relation to who they invest with".
Councillor Paul Rooney, convener of Strathclyde Pension Fund committee, said: "The committee's first responsibility is to members of the fund; and the advice from officers has always been that, where it has been tried in the past, the law has ruled that excluding certain types of investments had been a breach of that responsibility."
Dr Andrew Furber, of the Faculty of Public Health, said: "Local Government Pension Schemes in Scotland can meet their obligations to get the best returns on their investments without needing to put money into the tobacco industry."