Cornwall Council is not alone in investing in tobacco

Nearly a year ago I blogged about Cornwall Council’s investment via its pension fund in tobacco companies. This moral dilemma of is it right for a council to invest in tobacco is a difficult one. On one hand the council is often a lead in a campaign of healthy lifestyles and should lead by example, but it also has a duty to make sure people’s pensions are invested for the best.

Today, on the BBC website they are running a story on how much other council’s are investing in tobacco companies. These council’s have been highlighted because they are also the lead in Stop smoking campaigns. It will seem too many that these council are being preaching double standards. As on one hand they are saying, stop smoking, but still investing many millions into tobacco. Of course investing in tobacco is a profitable business as I blogged about  HERE .

My last figures showed Cornwall Council is investing just under £25 million in tobacco companies. However, that is only two percent of the total investment in the pension fund, but £25 million is still a large chunk of money. In the BBC report various east of England council’s have disclosed via the FOI Act their total investment. This amount to over £167 million with many investing the same amounts as Cornwall Council.

The largest investor in tobacco is Hertfordshire who invest roughly £44.6m. This works out as £40,270 per person. Cornwall’s population is roughly half that of Hertfordshire. Cambridgeshire who invest a similar amount (£25.3m) and is similar in size (600,400) in population as Cornwall invests £41.7k per head. For Cornwall, this investment would equal £45,45k per person.

The question is should a council invest in something that is harmful to health? Is the reasoning of a best return for any investment justification for investing?

Martin Dockrell, director of research and policy at Ash, has said in the BBC report:

“From 2013, local councils will have a responsibility for leading local efforts to reduce the burden of death and disease from smoking, yet many of them are the largest tobacco shareholders in the area.

Furthermore, if a council has some somewhat ethical investment policy, there could still be a loop-hole to still invest in tobacco. As according to Mr. Dockrell:

Ethical investment rules mean fund managers are permitted to say they will only “invest in tobacco when they can prove that there is no other investment that can match the value”.

I believe if a council is a lead in healthy lifestyles and health campaigns it should not be investing in products like tobacco. Sadly though, I doubt this will change because of the returns from investing in tobacco.

How Much Money is in Tobacco?

My blog about Cornwall Councils pension investment in tobacco companies got me wondering on how much money is in tobacco. I knew the returns would be quite good, but I was staggered at how much really can be made by investing in this sector.

Take for example British American Tobacco (BAT). Their current share price is £28.22 and has given an increasing yearly dividend. In fact, this dividend has risen from 32p in January 2001 to 114.2p in December 2010. Click HERE for the BAT 2010 Annual Report. In the last 10 years the dividend has only risen.

It is only when you compare investment in tobacco companies with other sectors you really see how much money is to be made. If you took the starting date of 1st January 1986 till December 2010 the returns (approx) for the following sectors are as follows*

Non-life Insurance – 500%
Technology – 500%
Food Retail – 900%
FTSE – 1000%
Banks – 1500%
Oil and Gas – 2500%

Tobacco – over 9000%

Yes, over 9000% return. That is, a totally staggering return. In fact if it was not for the ethical reasons behind investing in this sector I would be saying Cornwall Council should be investing in more than 2% of its pension fund. There is not another sector that has this type of return. If you took out the ethical side, you would be saying as an investor put my money in tobacco.

It does get back to the original point of should Cornwall Council have an ethical policy for investments, or should profit/return comes first. If it’s the later, then stop breaching ‘healthy messages’ if you are going to invest in something that contributes to death.

*have original source

Cornwall Council and Ethical Investments?

My fellow Cornwall Councillor Alex FolkesThe Packets Skipper and the West Briton have blogged/written about Cornwall Council’s investment in tobacco companies. It is not a small amount either; the total investment in the pension funds is £24.5 million. 
I do understand the need to have a balanced portfolio in the pension fund to safeguard against any disaster. Yes, it only equates to 2% of the total fund, but still!
Cornwall Council regularly promotes via schools and its own in-house departments healthy living, eating and lifestyles. This is to be welcomed as it can help educate people to having a more balanced lifestyle which can lead to less long-term issues/illnesses. Still, to say on one hand to look after yourself and still invest in tobacco companies is hardly practising what you preach.
I believe Cornwall Council as a public body should have a more ethical policy towards investments, and the council should look at alternatives of investing this £24.5 million. A bigger question is what other ‘less’ ethical investments does Cornwall Council invest in?