Senators have questioned the blind direction of spending from the federal government’s Future Fund. 

The Morrison Government has been called on to stop the nation's public wealth investment fund from funding companies linked with fossil fuels, the Myanmar military and childlike sex dolls.

The Future Fund was set up in 2006, taking in contributions from budget surpluses, proceeds from the sale of the government's holding of Telstra and the transfer of Telstra shares.

It is tasked with delivering returns between 4 and 5 per cent more than the Consumer Price Index, and is set to help cover annual unfunded Commonwealth superannuation liabilities.

The Future Fund is not allowed to invest in companies that manufacture tobacco or are subject to weapons-related sanctions recognised by Australia.

But Queensland senator Larissa Waters has questioned Future Fund head Raphael Arndt on a $3.2 million investment in Adani companies, including Adani Ports.

Adani Ports has been contracted to build and operate a port in Yangon, Myanmar's capital,  which is controlled by the country's military in an ongoing coup.

Adani says it is working independent of the military, but Senator Waters says international investigators have found otherwise.

Dr Arndt said Australia’s Future Fund has its investments managed by a US company, which he says has “undertaken” to talk to Adani Ports.

“We don't see it as our role to look into or understand the geopolitics of all the countries we invest in,” Dr Arndt said.

“Our job is to invest what's now over $220 billion worth of assets on behalf of the Commonwealth, and we've got many tens of thousands of positions across those portfolios, so we need to develop an investment strategy that is scalable and can be supported by the resources that we have.

“We think that the optimal way to do that is to have a very limited number of exclusions which we apply directly, for example, companies where their activities would be illegal in Australia, and other than that to work with our investment managers.”

Senator Waters said Australia should look at how the rest of the world manages such funds.

“The US Treasury Department has imposed sanctions, the EU has imposed similar sanctions, then going to exclusions, several large investment firms have excluded Adani Ports this year because of either their involvement with the military coup or Carmichael coal mine,” she said.

Dr Arndt at one point referenced the Future Fund’s investment in Chinese online retail outlet Alibaba.

Senator Waters asked: “Alibaba that did the sex dolls that got embroiled in scandal, child sex dolls?”

She was referring to an incident late last year in which the Australian Border Force worked with Alibaba to shut down a business selling and distributing childlike sex dolls in Australia from the Alibaba platform.

Senator Waters asked federal Finance Minister Simon Birmingham whether changes to the Future Fund's investment mandate may be put to the Cabinet.

“I think the Australian public would be mortified if you want the Future Fund to be making money off the back of child sex dolls, climate bombs and military coups, I genuinely do,” Senator Waters said.

Senator Birmingham said the fund is following its mandate to achieve returns for taxpayers.