Thursday, September 27, 2018

OTPP Signs Tobacco-Free Pledge?

Benefits Canada reports, Ontario Teachers’ signs tobacco-free investment pledge:
The Ontario Teachers’ Pension Plan has signed an agreement promising to divest from the tobacco industry as part of a wider pledge supported by multiple global government and health organizations.

“Given the reputational, social and commercial headwinds facing the tobacco industry today, we are no longer confident that it represents an attractive investment opportunity for a long-term investor,” said Barbara Zvan, chief risk and strategy officer at Ontario Teachers’, in a press release. “Signing this pledge reinforces and institutionalizes our conviction that tobacco is no longer a sensible investment for our fund.”

The tobacco-free finance pledge encourages its signatories to commit to a tobacco-free policy within their investments. The aim is in line with the United Nations’ sustainable development goals and the World Health Organization’s framework convention on tobacco control.

The pledge, initiated by the not-for-profit Tobacco Free Portfolios, was launched at UN headquarters during its general assembly this week and is co-sponsored by the governments of Australian and France. Its founding signatories include firms with assets under management of US$6.4 trillion.

“I am delighted that Tobacco Free Portfolios has founded the tobacco-free finance pledge in partnership with global leaders,” said Dr. Bronwyn King, radiation oncologist and chief executive officer at the not-for-profit organization, in the release. “This initiative exemplifies the action required to achieve the sustainable development goals, and brings us closer to a tobacco-free world.”
Ontario Teachers' put out a press release, Global leaders launch Tobacco-Free Finance Pledge:
For the first time, finance leaders are joining world leaders from government and health today to launch The Tobacco-Free Finance Pledge.

The Pledge encourages signatories to consider the adoption of tobacco-free finance policies across lending, insurance and investment, in line with the United Nations' Sustainable Development Goals and the World Health Organization Framework Convention on Tobacco Control. The ultimate goal is to reduce the current annual death toll of 7 million people a year1 dying from tobacco-related illnesses. According to the World Health Organization, tobacco consumption is the single largest preventable cause of death.

This initiative was launched today at United Nations' Headquarters during UN General Assembly week, at a high-level side event co-sponsored by the French and Australian Governments, and featured many speeches, including from HRH Princess Dina Mired of Jordan; Ms. Agnes Buzyn, Minister of Solidarity and Health, France; Mr. Paul Blokhuis, State Secretary for Health Wellbeing and Sport, Netherlands; Dr. Tedros Adhanom, Director General of the World Health Organization; Dr. Vera Luiza da Costa e Silva, Head of Convention Secretariat, WHO Framework Convention on Tobacco Control; Ms. Annette Dixon, Vice President for Human Development at the World Bank Group; John Chiang, State Treasurer California; Jean-Laurent Bonnafé, Director and CEO, BNP Paribas; Denis Duverne, Chairman, AXA; Adam Tindall, CEO, AMP Capital and François Riahi, CEO, Natixis.

The Pledge was initiated by not-for-profit Tobacco Free Portfolios, with CEO and Radiation Oncologist Dr. Bronwyn King and her team developing The Pledge in collaboration with UN agencies and finance sector leaders AXA, BNP Paribas, AMP Capital and Natixis.

The Pledge was launched today with over 120 Founding Signatories and Supporters. They include financial institutions from around the world collectively representing trillions of dollars of capital, including assets under management of over USD 6.4 trillion, corporate loan books of over USD 1.8 trillion and insurance premiums of over USD 179 billion. Ontario Teachers' Pension Plan, with C$193.9 billion in net assets at June 30, 2018, also signed The Pledge today, and announced its adoption of a tobacco-free position.

The global financial community is recognizing the increasing commercial, regulatory and social headwinds facing the tobacco industry and the need to ‘denormalize' tobacco by ending all business and financial ties with this industry. The finance sector has long been a missing piece in tobacco control, treating tobacco as a ‘normal' participant in the global economy and financing the industry through lending, insurance and investment. This public declaration of support for tobacco-free finance, and the call to others to follow suit is a decisive step, highlighted by increasing momentum and change.

MSCI, the world's largest provider of environmental social and governance (ESG) indexes2 and research3 today announced the launch of a suite of Ex Tobacco Involvement Indexes. This suite of indexes will be a standard offering that is easily accessible, simple to implement and will keep the cost of adoption low, reducing hurdles to removing tobacco from both passive and active portfolios.

Moving away from financing tobacco is an issue now placed firmly on the agenda of boards of financial institutions across the globe.

1 www.who.int/news-room/fact-sheets/detail/tobacco
2 By number of indexes and by assets tracking the indexes compared with publically available information produced by FTSE and S&P Dow Jones as of September 2018
3 By coverage of companies and by number of clients based on public information produced by Sustainalytics, Vigeo/EIRIS and ISS ESG as of September 2018

Quotes:

Founder of the Pledge
1. Dr. Bronwyn King, CEO and Radiation Oncologist, Tobacco Free Portfolios
"I am delighted that Tobacco Free Portfolios has founded The Tobacco-Free Finance Pledge in partnership with global leaders. This initiative exemplifies the action required to achieve the Sustainable Development Goals, and brings us closer to a tobacco-free world."

Collaborating Members
2. Thomas Buberl, Chief Executive Officer, AXA Group
"As a health insurer, we see every day the impact of smoking on people's health and wellbeing. At AXA, we want to help people to live in good health and contribute positively to society. In 2016 we were the first global insurer and investor to cease investing in and insuring tobacco, with the strong conviction that only a collective action can bring about change. This is why I am very proud to see today the strength of this collective Pledge."

3. François Riahi, Chief Executive Officer, Natixis
"We strive to make a positive contribution to all communities. This is our responsibility, and it is also the basis of our strategy to create sustainable value. As a stakeholder in the global shift to tobacco-free finance, Natixis is committed to supporting the efforts of public and financial players to work together and match our words with action."

4. Jean-Laurent Bonnafé, Director and Chief Executive Officer, BNP Paribas
"We're committed to financing economic development that has a positive impact on society. This includes action to ensure healthy lives for present and future generations. In this respect, we consider that the Tobacco-Free Finance Pledge is a milestone initiative. Having ceased our financing and investment activities related to tobacco companies, we are proud to be one of its Founding Signatories."

5. Adam Tindall, CEO, AMP Capital
"AMP Capital firmly believes in responsible investment and engagement to drive meaningful change in the community. Our tobacco-free position recognises tobacco is distinct with no safe level of use or opportunity for effective engagement. It reflects the changing attitudes of our clients who don't want to be invested in harmful products."

6. Fiona Reynolds, Chief Executive Officer, Principles for Responsible Investment
"Investors are becoming very concerned about increased regulation on tobacco products. This issue, combined with stakeholder uneasiness related to tobacco products, means that many are choosing not to hold tobacco stocks over the long-term."

7. Eric Usher, Head, UN Environment Finance Initiative (UNEP FI)
"We need wide-ranging action globally to achieve the Sustainable Development Goals and tobacco control is a clear example which can help meet 14 of the 17 goals. Finance must be part of the solution and The Pledge is a great step forward to achieving sustainable finance and a healthier society."

8. Butch Bacani, Programme Leader, UN Environment's Principles for Sustainable Insurance Initiative (PSI)
"As risk managers, insurers and investors, the insurance industry plays a key role in promoting good health and well-being. By signing the Tobacco-Free Finance Pledge, insurers are helping prevent the forecasted one billion deaths this century due to tobacco-related illness. Quitting is the only healthy and sustainable choice."

Tobacco-Free Announcement

9. Barbara Zvan, Chief Risk & Strategy Officer, Ontario Teachers' Pension Plan
"Given the reputational, social and commercial headwinds facing the tobacco industry today, we are no longer confident that it represents an attractive investment opportunity for a long-term investor. Signing this Pledge reinforces and institutionalizes our conviction that tobacco is no longer a sensible investment for our Fund."
I'm glad OTPP joined other large institutions and signed this tobacco-free pledge.

I've already covered why OPTrust butt out for good. On LinkedIn this week, OPTrust's President and CEO Hugh O'Reilly stated this:
"There is no such thing as a safe level of consumption of tobacco products and due to this reality, engagement is futile. Working with Dr. Bronwyn King, we took the decision to divest from public market tobacco firms."
It's important to understand something, Hugh isn't an advocate of divestments and they thought long and hard about this decision but he's right, engagement with big tobacco is futile and the cost to society of this industry alone far outweighs any cost of divesting from it.

And Barb Zvan, OTPP's Chief Risk Officer, is also right, the commercial headwinds facing the tobacco industry are enormous, especially in the developed world which is why big tobacco is focusing more on emerging markets where laws and regulations are lax.

By the way, the picture above features Barb Zvan along with Ontario Teachers' Chair Jean Turmel, Dr. Bronwyn King, and the honourable Malcolm Turnbull.

As for Dr. Bronwyn King, the Australian Financial Review just posted an article, Going tobacco free in the world of high finance and UN politics:
Fifteen years ago, Bronwyn King was a young radiation oncologist in Melbourne who was appalled by the ravages of tobacco affecting her patients in the hospital lung cancer ward. She decided to do something about it.

When she realised her own default superannuation fund was investing in tobacco companies, she had found her target – the finance sector.

That determination means Dr King will be standing at the United Nations in New York on Wednesday to promote "The Tobacco Free Finance Pledge" with 85 global financial institutions and combined assets under management of more than $US6 trillion ($8.2 trillion) as founding signatories.

Malcolm Turnbull had planned to be there as Prime Minister before his official attendance was cancelled due to circumstances beyond his control. So now he's turning up in his new capacity to speak as a private citizen at a joint Australian and French government sponsored event.



King tells The Australian Financial Review that the UN event being held at the same time as the opening of the general assembly is a "great way to give a global voice to an issue".

That global voice involves having representatives from governments and financial institutions in 18 countries also attending. From Australia, that includes QBE Insurance, First State Super, Mercer and AMP Capital. They are joining, among others, groups like BNP Paribas and AXA from France, ABN AMRO from the Netherlands, the Irish Sovereign Investment Fund, a Canadian pension fund, OP Trust, and the giant US pension funds CalPERS and CalSTRs.

Patient persuasion

California Treasurer John Chiang says he is proud to be one of the founding signatories on behalf of the $US90 billion State of California Pooled Money Investment Account.

"In California, public health programs are spending billions every year treating cancer, emphysema, heart disease and many other diseases linked to tobacco use," he tells The Australian Financial Review. "That's why I have made it a mission of mine to ensure not one dime, nickel, or penny of public money is invested in a product that kills our citizens."

Yet it's the personal drive of one female Australian doctor that has been the key to getting this gathering together. King, now 44, has managed this literally from her kitchen table, an unlikely headquarters for a registered charity, Tobacco Free Portfolios, she formally set up three years ago.

It's part of her effort to convince some of the world's biggest funds, banks and insurers to divest themselves of any investment options associated with tobacco. Not that King likes to use the term divestment. It sounds too confrontational for a woman whose style is one of patient persuasion behind the scenes. She's preferred to quietly head to corporate boardrooms rather that protest in the streets or at annual general meetings. She says corporate willingness to respond has accelerated, especially over the last five years.

"More than $US12 billion has already been shifted away from tobacco, and $1 trillion plus of Australian pension fund dollars is now tobacco-free," she says. "But I know numbers, and this is merely a fraction of what swills around our global financial markets. It's a great start but we have a long way to go."

Community responsibility

The most significant advance into mainstream Australian investing came in 2012 after King persuaded Michael Dwyer, chief executive of the large industry fund, First State Super, that the fund should get rid of investments, however minor or indirect, in tobacco. After a detailed analysis of whether this would be in members' interests, the fund agreed.

More importantly, she also used Dwyer's experience to get introductions to other super funds and industry conferences to sell the same message. That has now expanded to introductions around the world allowing King entree to many international financial institutions at senior levels.

And now many Australian super funds agree with her tobacco logic, she is hoping more banks will soon come on board. After all, Australian banks are clearly keen to demonstrate a sense of community responsibility in the wake of the royal commission.

Some companies will still be more concerned that banning tobacco investments will lead to calls for financial institutions to stay away from other investments, leading to a constantly expanding list of what's socially acceptable to activists.

Truly exceptional

Remember the decision by the Australian National University to blacklist seven resources companies on the distinctly dodgy advice of research group CAER a few years ago? Since then, environmental activism against the mining industry – particularly the coal and coal seam gas industries – has only become more powerful, sophisticated and effective. It ranges from protesters chaining themselves to gates or trees on mining sites to the broader divestment movement where groups, including banks, declare they are getting out of financing or investing in fossil fuels.

King sidesteps this by arguing tobacco is a truly exceptional product.

In her view, that is because tobacco has three key characteristics. One is that tobacco can never, ever be used safely. Another is that it has created a problem that is so globally significant that it's governed by an international treaty and sanctions. According to World Health Organisation statistics, seven million people will die this year due to tobacco, with 15,000 of them in Australia.

The other argument she poses to institutions considering her appeal is that using other potential tools as an alternative – such as greater engagement with tobacco companies – is futile and can create no meaningful change. There's no "improvement" possible.

King had planned to spend this week in Canada giving a speech at a medical conference – along with her husband, also a radiation oncologist. But it's in the world of high finance – and UN politics – where she now believes she can do her best cancer-prevention work.
I met Bronwyn in Montreal back in February when McGill University's faculty of medicine invited her to give a talk. She gave a great presentation and convinced me that pensions and other large institutions need to divest from tobacco.

If you want to know the number one global health scourge, look no further than tobacco. Nicotine in cigarettes is highly addictive which is why most smokers find it nearly impossible to quit and the list of chronic illnesses attached to smoking is long and is costing the world over $500 billion a year in health-related expenses (updated figures).

But big tobacco doesn't seem to care, its focus is squarely on emerging markets and the stocks of companies like Altria Group (MO) are performing fine for now and offer attractive yields:


Still, it's an industry which faces many headwinds and over long run, pensions would be wise to follow OPTrust, OTPP, CalPERS, CalSTRS and many others and divest from tobacco and invest elsewhere.

Below, Dr. Bronwyn King, radiation oncologist and CEO of Tobacco Free Portfolios discusses the need to eliminate tobacco companies from investment portfolios.

Dr. King has done wonders to bring this issue to the attention of large insitutions and I fully support her efforts and think all pensions should divest from tobacco as soon as possible. It's about time.

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