Letter to The FT about pension fund investment in tobacco



Thursday 07 October 1999
ASH/ Press releases/

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Letters Editor
Financial Times
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London SE1 9HL
By Fax: 0207 873 5938

ASH
Action on Smoking
and Health

7th October 1999

Dear Editor

Re: ethical investment and tobacco

It is disappointing, if not a surprise, to see a prominent pension fund manager dismissing measures designed to inform pension holders of what their funds are used for. (Pension chief raps ethical investment strategy, 6 October). The new regulations which apply from July 2000 merely require pension trustees to disclose “the extent (if at all) to which social, environmental and ethical considerations are taken into account in the selection, retention or realisation of investments”. This does not abolish the duty to find investments that offer the best profile of risk and return, but it does allow trustees to avoid tobacco or other ‘dirty’ investments if there are other investments that would perform at least as well.

In terms of risk and return, ethical funds have not systematically underperformed the market or other managed funds. They all exclude tobacco yet have rankings that are scattered throughout the league tables – a great many outperforming those that do hold tobacco. ‘Ethical or not ethical’ is much less important than ‘well managed or poorly managed’ in determining performance. No-one should be nervous about leaving tobacco stocks out of their pension. Tobacco comes with great volatility, political and litigation risks, and, in the UK, it operates as a duopoly ripe for the attention of the competition authorities.

Fund managers should understand that ‘performance’ has taken on a wider meaning and that many people simply do not want their long term savings in tobacco or other ethically dubious businesses. In theory, fund managers are the servants of the trustees, and the trustees guard the interests of the pensioners. All too often that hierarchy is inverted.

Yours sincerely,

Clive Bates

RegisteredCharity No 262067
Action on Smoking and Health is a company limited by guarantee.  Registered inEngland No 998971.  Registered address as above