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Europe's biggest pension fund to cut €3.3bn of tobacco, nuclear assets

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Dutch civil service scheme ABP has announced that it will divest its entire holdings in tobacco and nuclear weapons – worth an estimated €3.3bn – as part of a new assessment framework for sustainable and responsible investment.

The divestment will affect its stakes in manufacturers, associates and producers elsewhere in the production chains for such products, it said.

According to the €405bn pension fund, it reached the decision after extensive consultations at board level, based on the views of its participants, affiliated employers and various special interest organisations.

Last summer ABP came under pressure from a group of university medical centres to exit from tobacco-related investments. In 2015 the scheme came under pressure concerning its exposure to nuclear weapons development.

ABP made clear that it intended to sell its entire stake in tobacco and nuclear arms – estimated at €3.3bn – within a year.

It said the assessment framework was to serve as a new instrument for its board to review its investments, and was meant to offer additional criteria for investment exclusion.

The new rules provided for divestment if a product was by definition harmful to humans, and if ABP’s influence as a shareholder couldn’t change anything about this.

The scheme would also divest if the absence of a product would have no harmful effect, as well in case of the existence of a worldwide treaty aimed at eliminating a product.

In ABP’s opinion, these criteria would enable a uniform and consistent assessment of all products.

It said that tobacco and nuclear arms had yielded “healthy returns” in the past, but believed that the outlook had changed and there were options for strong returns on other investments.

“Therefore we expect that missed profits, if any at all, as a result of this decision, will be very limited,” the scheme said.

Several other large Dutch funds – including PGB, PFZW, SPH, SPMS and PME – have cut tobacco from their investment universes in recent years.

Renowned pension fund consultant Keith Ambachtsheer last year urged asset owners to consider removing tobacco from their portfolios, arguing that such assets were unethical and financially risky.

This is despite both Norway’s sovereign wealth fund and the California Public Employees’ Retirement System reporting that divestment from the sector had meant they missed out on investment gains.

 

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