NHS Urges Local Authorities to Divest From Tobacco Funds

(July 19, 2011) — Doctors are pushing local government pension funds to leave their investments in tobacco companies, naming the investment as an “unethical” practice and a “destructive industry.”

“If it were my pension contributions being invested in an industry whose only product line killed people in the numbers that die from tobacco, I would be absolutely horrified,” NHS regional director of public health for the South-West Dr Gabriel Scally told The Observer newspaper. “As a doctor I think it would be completely unethical to have any part in it.”

According to the Guardian, Cornwall council has the highest amount invested, with £24.5 million in Imperial Tobacco, Altria Group and British American Tobacco. Devon County council has £20.8 million, while Gloucestershire holds £16.8 million and Dorset has £14.7 million.

About £1 billion in such investments are present in councils across England.

Other pension schemes around the world have made efforts to serve as role models for socially responsible investment. In January, for example, Norway blocked 17 tobacco companies from its sovereign wealth fund, Europe’s biggest equity investor. The fund blacklisted Philip Morris, British American Tobacco, Imperial Tobacco, Altria, Reynolds American and Japan Tobacco, among other tobacco companies, after the Norwegian finance ministry ruled that the firms violated the fund’s ethical guidelines.

Tobacco divestment is part of a larger push by institutional investors and those who advise them to realign portfolios along more ethical – and some say efficient — lines. In August 2010, for example, legislation passed by Massachusetts Governor Deval Patrick gave the roughly $42 billion Massachusetts Pension Reserve Investment Board (MassPRIM) one year to study and exit any investments that directly or indirectly support the Iranian oil industry. The governor had signed legislation that would force the state pension fund to divest from companies supporting Iran’s oil industry.

According to the legislation, MassPRIM had one year in which to hire an independent research firm to conduct a study of its holdings and divest from any companies that invest in the Iranian oil industry. The legislation also required the MassPRIM board to update the list of prohibited companies on a quarterly basis, the law stipulates.

More recently, the $153 billion asset manager PGGM has increased its ESG allocation by $1.6 billion to $5.4 billion in 2010, according to its Annual Responsible Investment Report.

“Responsible investment is immensely important to PGGM,” the pension provider’s chief investment officer Jac Kragt said in a statement. “It fits in with our identity as an asset manager for long-term investors and helps build a valuable society. We achieved success with our responsible investment for our clients in 2010.”

The fund worked with Erasmus University Rotterdam to determine the impacts of ESG investments in order to generate financial returns and add social value in areas such as local economic development, biodiversity and health, according to the report. Furthermore, PGGM analyzed the effects of climate change and climate policy on the overall portfolio in anticipation of stricter rules for a climate-neutral future following heightened regulation.