A ‘Big Tobacco’-funded foundation is developing a “Smoke-Free Index” entirely made up of cigarette companies – a move which has been met with scepticism from players in the responsible investment community.
The Foundation for a Smoke-Free World (FSFW), a non-profit funded by tobacco giant Philip Morris International (PMI), said the index of 15 of the world’s largest tobacco firms would “provide evidence of the steps companies are taking towards achieving a smoke free world”.
The index is being produced in partnership with consultancy and thinktank SustainAbility and market research firm Euromonitor International, and – according to the foundation – will provide “quantifiable evidence of how tobacco companies are addressing industry transformation…to enable stakeholders to make better decisions”.
But investors and campaigners have slammed the index, with influential campaign group Tobacco Free Portfolios (TFP) branding it a “direct challenge to the positive impact achieved to date by the finance sector in advancing tobacco-free finance” in an email sent to investors.
TFP — the group founded by Australian cancer specialist Bronwyn King — contacted investor signatories of the Tobacco-Free Finance Pledge and other contacts to urge them not to engage with the foundation.
There was a feedback meeting on the index last week to which it is thought investors were invited.
The email was sent by SustainAbility, which has been tasked with leading a multi-stakeholder dialogue to inform the index.
The project has also been met with criticism by investors.
A spokesperson for NN Investment Partners – part of NN Group, which excluded tobacco from all its investments in 2018 – said having a best-in-class approach to the tobacco sector “is not relevant for us”.
They said: “The tobacco sector is exposed to a significant number of ESG-related risks and increasingly stringent regulation. Engagement with the sector has not proved to be successful, as the overarching concerns remains the impact of the product.”
Ruben Zandvliet, Advisor Environmental, Social and Ethical Risk & Policies at Dutch bank ABN Amro, told RI there was “no reason for responsible investors to engage with this initiative”.
He said: “Responsible tobacco companies is an oxymoron. That’s confirmed by very authoritative sources like the WHO [World Health Organisation]. There’s a fundamental problem with the product [tobacco] which cannot be replaced by this framework that they want to put into place.”
In 2017, ABN Amro announced it would no longer extend credit to or invest in tobacco firms.
Zandvliet continued: “You see an unstoppable movement towards divestment and disengagement with tobacco companies. Many banks, pension funds and asset managers are taking this step and many are also considering it. This index pretends to provide an alternative, especially to financial institutions that are considering divestment, to say there is an alternative – namely to invest in responsible tobacco companies.”The tobacco divestment movement has picked up speed in recent years. Investors including the likes of AP4, ABP, BNP Paribas and Robeco have made moves to sell out of tobacco stocks, and in September last year MSCI launched a suite of Global Ex Tobacco Involvement Indexes.
“‘Responsible tobacco companies’ is an oxymoron”
The Tobacco-Free Finance Pledge boasts 140 signatories and supported with $7.1trn in assets under management. The UN Global Compact, the corporate sustainability initiative, banned tobacco companies from participating in July 2017.
Established in 2017, the FSFW describes itself as an independent, non-profit organisation created to accelerate global efforts to reduce health impacts and deaths from smoking.
A spokesperson from the foundation said: “[We believe] the tobacco industry needs to change its practices to accelerate the end to the production and use of combustible cigarettes globally.
“We believe now is the right time for this index because of the unprecedented and innovative technologies being introduced into the marketplace that are separating health risks associated with nicotine delivery compared to those of emissions found only in combustible cigarettes. These innovations can help drive the transformation of the tobacco industry. The Foundation is engaging various stakeholders to implement this Index and develop metrics that investors and policymakers understand, value, and utilize.”
Philip Morris International has said it ultimately plans to stop selling combustibles cigarettes, with a shorter-term ambition for at least 30% of its customers who would otherwise continue smoking to switch to smoke-free products by 2025.
The foundation declined to comment on whether the index was intended to be an investment product, or if it was simply a benchmarking tool comparing tobacco companies, saying the index was “in the early stages of development”.
The index will look at tobacco firms’ actions in 35 countries, though the chosen countries are not named.
The World Health Organisation (WHO) has ruled out engaging with the foundation and advised that governments and the public health community follow its lead.
It said: “When it comes to the Foundation for a Smoke-Free World, there are a number of clear conflicts of interest involved with a tobacco company funding a purported health foundation, particularly if it promotes sale of tobacco and other products found in that company’s brand portfolio.”
The UN Tobacco Treaty (the Framework Convention on Tobacco Control) and other organisations have also committed to not engage with the foundation.
The foundation, meanwhile, told RI its index is intended to complement the World Health Organization Framework Convention on Tobacco Control (WHO FCTC)
A spokesperson said: “There is no industry influence on the Smoke-Free Index activities or any of the Foundation for Smoke-Free World’s work.
“The Foundation has a Pledge Agreement with Philip Morris International that secures funding and ensures complete autonomy to pursue our mission to end smoking in this generation.”