Health insurer to ditch investments in tobacco

Credit: Jirsak/Shutterstock.com

Shares worth almost €184 million will be immediately sold off, while their bond portfolio - worth nearly €1.6 billion - will be allowed to wind down.

The insurer says tobacco is a "sunset" industry, with restrictions on its use only likely to increase in the future.

No smoking

It's been nine years since smoking was banned in enclosed public places in the UK; recently anti-smoking groups have had further reason to celebrate with the UK Government joining those in France and Ireland in requiring cigarettes to be sold in plain packaging.

Nevertheless, reducing the population's reliance on tobacco will take time - particularly as the World Health Organisation says smoking is still on the rise in the Eastern Mediterranean and Africa.

It's for this reason that Axa's incoming chief executive, Thomas Buberl, says that the decision to divest "has a cost for us" - he means that tobacco investments are currently still generating good returns.

Being an insurance company, Axa are understandably keen to portray themselves as responsible to their customers who, after all, are furnishing them with money in the first place.

Given that tobacco is estimated to kill six million people globally each year, at a cost of €2.1 trillion, no longer investing in it is probably a good start.

Business of ethics

So, too, is showing an interest in the future of the planet.

Last year, Axa announced that they were withdrawing from coal-related investments, while also promising to treble their "green" investments, in keeping with a more responsible corporate approach to climate change.

This kind of display of commitment to a more sustainable future has become far more common in the investment world, as more of us ask that our money be used in a more positive way.

According to research group EIRIS, there are now almost 100 green and ethical funds available to UK investors.

Unfortunately the "ethical" tag sometimes isn't clearly defined. As Australia's Financial Review put it, some will be involved in coal mining, while "others are happy to make money from the sale of alcohol and cigarettes".

In creating a fund, they say that the most common approach involves screening out any companies involved in a particular list of industries, including weapons, alcohol, pornography, gambling, tobacco, nuclear energy or fossil fuels.

However, many funds will still allow some level of involvement in other sectors listed above, albeit perhaps in a limited fashion.

They may state, for example, that they will draw no more than five or ten percent of their revenue from such "unethical" sources.

Increased competition

For those more concerned about capital than conscience, the increased interest in ethical funds means there's no longer the excuse that ethical investment funds are doomed to poor returns.

Last autumn, the Guardian reported that the typical ethical fund increased by around 32% to 35% over three years, compared with 28% for the FTSE All-Share index and 24% for the AFI Balanced index.

But even with a wider than ever range of different investments available to us in the form of ISAs, child trust funds and pensions, it can be difficult to keep track of where every penny we're saving ends up.

Those of us with pensions or investments that make use of trackers are likely to be indirectly funding companies we might not consciously choose to back.

But there are still ways we can do our bit, should we care to - with the obvious starting point being our choice of personal bank.

Out of YourEthicalMoney.org's list of 56 banks, 24 showed no evidence of an ethical lending policy

Others, like Triodos for example, apply absolute criteria about who they will not lend to -which includes having any dealings with companies involved in the production or sale of tobacco.