Bronwyn King, the Australian doctor leading a global push to encourage fund managers to exclude tobacco stocks, said she's had approaches from six major funds in New Zealand interested in making the shift.
The move follows investor uproar earlier this year after media investigations found New Zealanders had unknowingly invested $152 million in arms manufacturers and big tobacco companies through their KiwiSaver funds, she said.
Ms King is chief executive of Tobacco Free Portfolios and a practising radiation oncologist in Melbourne. She has already persuaded 35 Australian superannuation funds controlling nearly half of the total funds under management in that country to shun tobacco. She doesn't know the numbers of funds that exclude tobacco in New Zealand, though ANZ is a recent convert and the New Zealand Superannuation Fund was the first sovereign wealth fund in the world to do so.
Ms King's own epiphany came in 2010 when she and her Kiwi husband wanted to buy a house and she went to discuss her savings in the superannuation fund Health Super with a consultant. As she left, she asked whether she was meant to specify how she wanted her money invested in Health Super. The consultant replied she didn't need to worry because she was in the default option where the decisions were made for her.
Ms King then asked what the options were and was told there was a "greenie option" involving no investment in mining, alcohol, or tobacco.
"It was a big shock knowing I was investing in tobacco companies that were making products that killed my patients," she told a Responsible Investment Conference in Auckland yesterday.
It turned out Health Super's default option included investing in four of the big tobacco companies, and Ms King shared that news with other staff members at Peter Mac, a dedicated cancer hospital. She also raised it with the chief executive and then with the super fund which had merged with Sydney-based First State Super. After a lot of discussions, it became the first Australian superannuation fund to renounce tobacco investments in 2012.
One of the biggest successes in Ms King's campaign came this year when Axa, the world's second-biggest insurer, said it would sell €200 million of tobacco stocks and run down €1.6 billion of tobacco corporate bonds. Ms King says she's currently working with more than 100 financial institutions, with four more likely to announce a similar move soon.
The tide has turned in public sentiment on the issue and fund managers who manage investors' money are slowly waking up to that fact, she said.
The pitch that has worked best has been highlighting the tobacco industry's exploitation of young people with an estimated 100,000 children starting smoking each day.
Not many people are aware that according to the International Labour Organisation up to 60% of the workforce in tobacco farming are aged under 16, she said. The average age at which Australian smokers take up the habit is 15 years and nine months – the oldest in the world. The average in the UK is just 11 years.
The percentage of boys who smoke between 13 and 16 years old is 3.7% in New Zealand but is much higher in emerging countries such as Indonesia where the figure is 41% and 52.1% in Papua New Guinea.
"This is not about adults making an informed choice but about children who start smoking when they're too young to be aware of the risks," she said.
One conference attendee said one of the problems with divestment was that tobacco stocks had done so well for investors over the years. Ms King said that was the most difficult thing though there were signs those profits could change in the next 10 years.
"The industry has done well in the past 10 years because it has gone into the developing world before these regulations were crafted. It's made the most of these very poor populations with large user bases and very poor levels of awareness and very poor regulatory frameworks, an industry that continues to get away with 60% of its workforce being child labour, externalising costs and internalising profits and not being held to account for all of these deaths is extraordinary."
Ms King said there are three strong reasons behind going tobacco free: Tobacco is a unique product in that it can't be used safely, with two out of three smokers dying from its use; the UN Tobacco Treaty signed by 180 countries including New Zealand requires governments and related bodies not to invest in the industry and take other measures such as plain packaging; and engagement with the industry to change its behaviour is futile.
There's a regulatory risk for fund managers with three countries having introduced plain packaging legislation and another 20 will have by next year, Ms King said. New Zealand has signed off on it but not yet set a date for implementation.
There is also a litigation risk with the Quebec state government succeeding last year in a landmark class action suit against three big tobacco companies where the judge awarded $C15.6 billion in compensation to one million smokers for the health effects of the products. It is being appealed by the tobacco companies.
Ms King said the case was one the rest of the world should watch with interest.
"If that precedent is set, I can't believe the people of New Zealand would be happy to continue to pick up the costs of the tobacco industry, it doesn't make any sense. The truth is if we all sued at the same time the tobacco industry couldn't even pay its own costs for one year."
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