Pension giant cuts tobacco

A pension giant is offloading $73 million worth of investments in tobacco companies as its chief investment officer sees no future benefits for its members in the industry.

The UK's National Employment Saving Trust has set a two-year deadline for ridding its portfolio of the £40 million ($73 million) investment.

The fund said it has decided the tobacco industry is a poor investment for its eight million members, in light of stricter worldwide regulation against tobacco products, increasingly aggressive legal action by governments against the tobacco industry and falling global smoking rates.

Nest already has a tobacco-free policy in its ESG emerging markets fund and commodities fund. The latest announcement weeds it out of all other fund choices including the Nest Retirement Date Funds (which are similar to lifecycle super products in Australia).

Nest's external fund managers are supporting the change, it said in a statement.

"We have not taken this decision lightly but we don't think it makes sense to continue investing in an industry whose business model looks increasingly unsustainable," Nest chief investment officer Mark Fawcett said.

"We've already spoken with our fund managers and the fraction of a percent of tobacco investments we currently have will be gone within two years."

One of the managers who will offload tobacco on Nest's behalf is Amundi.

"We do not see attractive risk reward of the tobacco sector in the emerging market bond universe and the market share is fairly modest in the emerging market debt space. Nest's decision to go tobacco-free is consistent with Amundi's ESG view to cap tobacco companies in our lowest two ratings before exclusion," Amundi co-head of EM fixed income said.

"We have seen a significant interest in investments with an Environment, Social and Governance (ESG) anchor and Nest's announcement today shows the organisation's determination to take the lead and set an example in this area."

Read more: AmundiESGNest RetirementAustraliaEnvironmentGovernanceMark FawcettNational Employment Saving TrustSocialUK
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