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Croydon scheme shifts £350m to ethical fund as UK councils shun tobacco

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The pension fund of the London Borough of Croydon is switching all its equity assets of around £350m (€442m) to a Legal & General (L&G) global ethical investment fund to avoid exposure to tobacco, nuclear power and arms stocks.

The decision to move equities investment to the L&G fund, and out of the four funds the allocation is now invested in, was made by the council’s pension committee last week.

Chair of the committee councillor John Wentworth said: “Having a pension fund that invests in tobacco was very much at odds with our responsibility to protect and improve public health in this borough, and there were clearly a number of concerns about the ethics of doing that.

“Ensuring the council is a socially responsible investor was a key manifesto pledge for the administration.”

Councillor Simon Hall, cabinet member for finance and treasury at the council and vice-chair of the pension committee, said the council would be getting a better investment deal, as ethical funds were performing favourably against other schemes. 

“Tobacco is not the low-risk, high-profit investment it once was,” he said. 

“This really is in the best interests of the scheme’s beneficiaries and residents, both ethically and financially.”

He said there was a balance to be struck for the committee in fulfilling its fiduciary duties and adhering to its ethical principles, and that the committee members had been satisfied they had achieved this balance.

Meanwhile, members of Suffolk County Council yesterday voted overwhelmingly in favour of asking their pension fund to stop investing in tobacco companies.

The council voted 49 to 10 in favour of a motion originally proposed by Labour Group leader Sandy Martin and seconded by Tory backbencher Michael Bond to ask the pension fund committee “to replace investments in tobacco with other holdings, which are considered comparable in terms of the balance of risk and return”.

The motion began with a resolution by the council to be a signatory to the Local Government Declaration on Tobacco Control, as endorsed by the public health minister Jane Ellison.

Martin told IPE the decision was now in the hands of the pension committee.

The committee had a duty to act in the best interests of the beneficiaries, he said, but added that this did not simply mean achieving the highest financial returns.

“Their best interests might very well be served by not seeing their grandchildren smoke,” Martin said.

In a briefing prepared for the council, Martin said there was an estimated £2bn currently invested by UK local authorities in tobacco companies. 

He cited the London boroughs of Newham and Brent as examples where local authorities had changed their statements of investment principles to limit their exposure to tobacco companies.

Brent had cited the risk that tobacco companies may face large liabilities from outstanding court actions as a reason for their exclusion, according to the briefing.

However, Martin also noted in the briefing that Norfolk and Herefordshire county councils had tried and failed to divest their pension funds from tobacco stocks.

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