UK – The head of the 620 million-pound (897 million-euro) Shropshire County Pension Fund has defended its decision to readmit tobacco investments – a move which has saved 2.9 million euros.
Phil Guy, head of treasury and pensions at Shropshire County Council in central England, said that “after a great deal of soul-searching amongst committee members” the fund recently decided to allow its fund managers to invest in tobacco stocks at their discretion.
The decision process took almost two years, driven by a feeling that the fund’s prime responsibility was to discharge its financial duty.
“We do feel we have a duty to the wider world as long as it doesn’t impact on our fiduciary duty,” Guy told a conference in London organised by Isis Asset Management.
Mary Francis, director general of the Association of British Insurers, told the same conference that socially and ethically responsible investing could increase returns and reduce volatility.
The fund currently has holdings in five tobacco stocks, Guy said, adding that tobacco stocks were seen as defensive in the declining markets of recent years.
He added the move was prompted in part by local media reports suggesting that Shropshire’s council tax, which funds local services, would have to rise to help fund the scheme. Guy said the fund is the largest single enterprise in the rural county.
“Any shortfall in the pension fund falls on the council taxpayer. We felt vulnerable to such a challenge.”
“We felt we did the right thing at the time and still do,” Guy said. He said that, comparing returns, the decision had saved the scheme around two million pounds.
“We have a fundamental belief that socially responsible companies will perform better over the long-term – for society and the planet in general,” he said.
Meanwhile, a survey of 130 UK pension fund trustees by Just Pensions and the Ashridge business school found that more pension funds said they were building social and environmental issues into their investment practices. The survey found the trend was set to continue in the next few years.