Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. ESG
March 13, 2019 01:00 AM

As pension funds exit, tobacco stocks lose world-beating status

Bloomberg
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Bloomberg

    It wasn't so long ago that the stellar performance of tobacco stocks such as British American Tobacco and Philip Morris International was enough justification for asset managers to hold onto their investments, despite a broader push toward socially responsible investing.

    But in recent years, a flurry of European pension funds and insurers have begun divesting their holdings, putting pressure on the share prices. British American Tobacco had its worst year on record last year, slumping 50%, as the U.S. Food and Drug Administration toughened its stance toward the tobacco industry. Philip Morris slumped 37%.

    The MSCI World Tobacco index returned an impressive 1,437% from the end of 1999 through 2015, compared with just a 72% return for the broader MSCI World index. But since 2016, when momentum for tobacco-free portfolios finally started to take hold, the industry has underperformed the broader benchmark.

    "Clearly, selling pressure from some investor classes who have decided that it is inappropriate to invest in tobacco for environmental, social and governance reasons will have been unhelpful for tobacco share prices, given the scale of some of the institutions concerned," Investec analyst Eddy Hargreaves said in written comments.

    Bronwyn King, an Australian doctor who treats cancer patients, was shocked to discover in 2010 that her retirement fund was investing in tobacco companies. This prompted her to establish Tobacco Free Portfolios, a non-profit organization that encourages pension funds, sovereign wealth funds, banks and insurers to stop investing in tobacco.

    The initiative went global: French insurer AXA in May 2016 announced it would stop investing in the tobacco sector due to the prevalence of smoking-related diseases. U.K. insurer Aviva started selling its tobacco shares in June 2017 and no longer holds any of the stocks in its actively managed funds, the company said.

    The momentum has spread further throughout Europe since then. Stichting Pensioenfonds, the pension fund for Dutch government and education workers, in January 2018 pledged to sell all of its investments in the tobacco and nuclear weapons industries within a year, while Swedish pension fund Forsta AP-fonden said that tobacco was among the industries its AP1 fund no longer invests in as of the beginning of this year.

    The exit by pension funds and insurers added to the tobacco industry's woes at a time when it also faced increased regulatory scrutiny from health authorities trying to limit the spread of the cancer-causing product, as well as the uncertain volume trajectories of both conventional cigarettes and so-called next-generation devices.

    "We don't anticipate a sea-change back into more positive investor sentiment for tobacco in the nearer term," said Hargreaves, who said tighter regulation was having a bigger impact on the stocks than the divestitures.

    Tobacco shares surged after the surprise March 5 resignation of FDA Commissioner Scott Gottlieb, who had indicated the agency would seek to require companies to reduce nicotine levels and restrict sales of e-cigarettes to minors.

    Still, Credit Suisse Group analyst Alan Erskine warned that optimism over a potential change in FDA's policy direction was misplaced.

    "Whilst there might be a short delay in policy announcements, we think the FDA will still file, later this year, a notice of public rulemaking, proposing to ban menthol cigarettes," Mr. Erskine wrote in a note Monday.

    BAT will be holding a meeting for investors and analysts Thursday, where the market focus will be on further detail about the tobacco giant's plans for cigarette alternatives to counter tightening regulation and growing competition from the likes of Philip Morris's IQOS and industry upstart Juul Labs.

    Meanwhile, the sell-off by big investors may have further to go: On average institutions still own about 86% of tobacco companies' shares, according to data compiled by Bloomberg for stocks in the MSCI World Index, compared to 76% of all companies in the benchmark.

    Related Articles
    BNP Paribas Asset Management to divest tobacco from funds by end of year
    Robeco to exclude tobacco investments from all mutual funds
    Tobacco-Free Finance Pledge initiative launches
    AP1 divests nuclear weapons, tobacco, coal and oil sands stocks
    States are suing opioid manufacturers but their pension funds embrace them
    Recommended for You
    christopher_ailman_calstrs_2018-main_i.jpg
    CalSTRS asks SEC to include Scope 3 emission disclosures in proposed rules
    Ben_Franklin_Closeup_i.jpg
    Brookfield closes net-zero transition fund at $15 billion
    california-capitol-sacramento_i.jpg
    California bill requiring CalPERS, CalSTRS to divest halted by committee chair
    Strong Demand Drivers Underpin Private Credit
    Sponsored Content: Strong Demand Drivers Underpin Private Credit

    Reader Poll

    June 6, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Nearing the finish line: Ideas on end-state investing for corporate DB plans
    The Meaning of "Portfolio Intelligence"
    Credit Indices: Closing the Fixed Income Evolutionary Gap
    Forever in Style: Benchmarking with the Morningstar® Broad Style Indexes℠
    Crossroads: Politics, Inflation, & Bonds
    Is there a mid-cap gap in your DC plan?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    June 20, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit