The Clarence Valley Council (CVC) is being asked to pull its investments out of banking institutions which invest in fossil fuels.
A notice of motion from CVC councillor Greg Clancy will be considered at a workshop in November.
It asks for the CVC to gradually divest its term deposit portfolio from all fossil fuel aligned financial institutions.
Fossil fuels are defined as "a natural fuel such as oil, coal or natural gas, formed in the geological past from the remains of living organisms".
The council currently has $75 million invested in term deposits — $25 million is with institutions that support fossil fuel entities.
CVC's corporate director Ashley Lindsay said a change might deliver a better financial return.
"The main institutions that are fossil fuel investing institutions are the higher rated banks, the four central banks," he said.
"Some of the councillors were a little concerned that we would be moving our investments out of those higher-rated institutions, which they thought may be safer
"But the ironic thing there is that some of the lower-rated, non-fossil fuel linked institutions will give the council a better return."
Mr Lindsay's report to the council said there was growing consensus all governments needed to do more to reduce greenhouse gas emissions in order to stay below the critical limit of 2 degrees warming.
It said nine NSW councils have already passed divestment motions.
The report continued the domestic major banks — ANZ, CBA, NAB and Westpac — are all rated "AA-".
It said they ranked among the highest commercial banks lending to fossil fuels in Australia.
The CVC Community Climate Change Advisory Committee has recommended the council divest its funds from financial institutions that finance fossil fuel companies.
Mr Lindsay said any vote for change would hinge on whether CVC councillors have an appetite for greater risk.
"Certainly from a financial point of view we would get a better return," he said.
"If we're purely looking at it from that perspective, it would not be a bad decision.
"Also from the community's point of view it's probably a good leadership decision to make.
"Council certainly opposed coal seam gas exploration and drilling in the region."