PensionsApr 16 2014

Funds given go-ahead to sell tobacco shares

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The chief executive of ShareAction, a UK-based non-governmental organisation that campaigns for responsible investments, said a recent legal opinion from Nigel Griffin QC endorsing an ethical tie-break principle was grounds for lobbying pension funds to sell their tobacco holdings.

Ms Howarth said: “The legal opinion from Mr Griffin endorses the ethical tie-break principle. According to this principle, as long as a pension fund can show there is no financial disadvantage, the fund is free to divest from tobacco.”

Mr Griffin was commissioned by a group of local authority pension funds and found they are not permitted to ditch tobacco holdings if there would be a financial disadvantage.

However, if a case can be made for substituting tobacco stocks for other company shares that produce the same financial returns, there is no legal impediment, paving the way for fund members to propose divestment from tobacco holdings.

Ms Howarth said: “This opens the way for scheme members in local authority funds, to whom fiduciary duties are owed, to propose that their funds look for alternatives to tobacco that deliver the same long-term investment returns.

“I predict that certain health workers who recently joined the local government pension funds will formally request this process be undertaken.”

Tobacco divestment is increasingly common in pension funds around the world. The Newham Pension Fund has already removed tobacco from its portfolios.

Adviser view

Philip Stevenson, director of Cheshire-based ARK Independent Financial Advisers, said: “We don’t come across many ethically challenged clients. I don’t think something like this would concern everyone. As long as the investment is performing in the right way, clients are likely to be happy. Everyone has a different approach to these issues – the key is to diversify investment.”