The Church Commissioners for England will withdraw its £3.8m investment in News Corporation unless its chairman Rupert Murdoch ensures he will hold senior executives to account for the phone-hacking scandal which led to the closure of the News of the World newspaper this past Sunday.

In a letter to Murdoch, the Church Commissioner’s ethical investment advisory group (EIAG) says closing the News of the World is not a sufficient response to revelations of malpractice at the paper, and demands that he holds senior executives to account for the gross failure of management.

News Corporation owns News International which publishes News of the World.

Professor Richard Burridge, deputy chairman of the ethical investment committee, said: "If we don't get a satisfactory answer then disinvestment comes on to the horizon, but you can't go straight to the nuclear option, you have to engage first."

The Church Commissioners, which manages funds on behalf of the Church of England, has one of the biggest UK’s charity investment portfolios, with a total of £5.3bn under management. It holds 344,586 shares in News Corporation, worth almost £3.8m.

According to Investment Week, News Corporation’s share price fell 7 per cent in the US last week amid fears that the reputational fallout from the phone-hacking scandal would impact on the newspaper’s parent company.

The EIAG has urged Murdoch to insist that the board of News Corporation takes all necessary measures to instil investor confidence in the ethical and governance standards of News Corporation.