Some of the world’s largest investment firms have thrown their weight behind efforts to combat smoking, sparking renewed calls for UK local authorities to divest all their shares in the tobacco industry from their pension fund investments.
More than 50 companies managing $3.8tn of money, including pension funds and insurers, declared support for “tobacco control measures being taken around the world” – even though some of them still own shares in tobacco businesses.
In a joint statement, released to coincide with World No Tobacco Day, they said: “We in the investment community are becoming increasingly aware of the important role we can play in helping to address the health and societal impacts of tobacco.”
The firms cited studies suggesting that smoking costs the global economy more than $1tn a year, outstripping global revenues from tobacco taxes. Signatories of the statement include Axa – the French insurance firm that sold its entire €1.8bn tobacco portfolio last year – and Calpers, the giant US fund with nearly $300bn of assets under management. Calpers has also divested itself of all its tobacco investments.
While some large investors have sold tobacco holdings, funds managing the pension investments of UK local authority staff still own at least £1bn of tobacco stocks, according to analysis by the Guardian. The share register of British American Tobacco, owner of Benson & Hedges and Lucky Strike, includes 28 local government schemes, which together own a combined £700m stake in the company.
The council with the largest investment in BAT is Hampshire county council, with around £81m of pensioners’ money invested in the firm. BAT has an office in Southampton, but ceased production of cigarettes at the site in 2007.
Nottinghamshire Local Government Pension Fund is second with around £62m worth of shares and is also among the largest investors in Imperial Brands, which makes Embassy and Superkings. Cigarettes were produced in Nottingham until May last year.
Imperial counts 19 local authorities among its shareholders, with their investments adding up to nearly £290m. In total, share registers disclose that local authorities own close to £1bn of shares in the two companies. Their total tobacco investment is likely to be higher if they are invested in separate funds that also count cigarette companies among their portfolio of shares.
One of the obstacles to council pension funds selling tobacco stocks is a legal argument that trustees are obliged to prioritise the need to maximise investment returns over anything else. But guidance issued by the Department for Communities and Local Government said trustees did have some room for manoeuvre. “Although schemes should make the pursuit of a financial return their predominant concern, they may also take purely non-financial considerations into account provided that doing so would not involve significant risk of financial detriment to the scheme and where they have good reason to think that scheme members would support their decision.”
Deborah Arnott, the chief executive of the health charity ASH, said this left the door open for selling tobacco stocks. “Historically, investment in tobacco was seen as safe, promising good returns, but increasingly fund managers are realising investing in tobacco is neither acceptable nor sustainable,” she said. “Local authority pension funds have a legal duty to get the best deal for their pensioners, but if big investment funds like Axa can disinvest then surely local authorities, which have a legal duty to promote the health of local people, can do the same.”
Dr Bronwyn King, an oncologist who was instrumental in persuading Axa to drop its tobacco investments, said local governments should give serious thought to divesting, particularly given the cost to the public purse of smoking-related illness. “We call on all government-related pension funds and sovereign wealth funds to look again at their policy. The health sector across the world is unified on tobacco but that alone won’t be enough. If the finance sector continues to invest in tobacco and strive to profit from them, we’re working against each other.”
The statement by investors calling for tighter tobacco control was issued at a conference in Paris to mark the annual no-tobacco day, started by the World Health Organisation. WHO has estimated that tobacco claims more than 7 million lives each year.
Thomas Buberl, chief executive of Axa, was among the speakers at the event, a year on from the company’s decision to sell all its tobacco stakes. “As the Axa group strives to be a partner in society, it is clear that action must be taken to combat the enormous human costs of tobacco,” said Buberl. “I am convinced we must work together if we want to bring about change. Therefore, we are very proud to be working with other major financial actors and key stakeholders in support of governments to take action on tobacco control.”