It’s time for #ustoo movement in investments
In October 2018, a major development in Australia escaped the attention of Indian news media and tobacco activists alike. An epoch-making moment, it signifies a big shift in the fight against tobacco.
The Australia-based not-for-profit, Tobacco-Free Portfolios, launched the world’s first ‘Verified Tobacco-Free’ certification stamp. It will be rolled out in Australia this year.
The stamp will indicate whether a financial institution is investing money in killer tobacco, the single largest preventable cause of early death, according to the World Health Organization.
It all began in 2010 when Bronwyn King, a radiation oncologist, discovered that her industry superannuation fund was investing in tobacco. Having seen at close quarters the devastating effect of tobacco-related diseases, she set up Tobacco-Free Portfolios to free the finance sector from tobacco.
The results are truly astounding — in October 2018, $1.3 trillion in funds under management in Australia were tobacco-free.
The launch of ‘Verified Tobacco-Free’ certification stamp was preceded by a high-level side event during the UN General Assembly week in September 2018 — The Tobacco-Free Finance Pledge.
Co-sponsored by the French and Australian governments, the Pledge currently has 140 founding signatories and supporters, including financial institutions from across the world, collectively representing assets under management of over $7.1 trillion, corporate loan books of over $1.9 trillion and insurance premiums of over $190 billion.
By choking investment, this unique initiative could hit big tobacco where it hurts. Finance has so far been the missing piece in this fight. Big tobacco has prospered, at least in part, as a result of continued financial investment.
The Pledge encourages signatories to consider the adoption of tobacco-free finance policies across lending, insurance and investment, in line with the United Nations’ Sustainable Development Goals and the World Health Organization Framework Convention on Tobacco Control (FCTC), an international treaty for promoting public health.
LIC investment in spotlight
While the movement to make investment in tobacco ‘uncool’ gathers momentum globally, it is yet to make its mark in India.
A beginning was made in a public interest litigation in April 2017, which highlighted the government’s violation of the FCTC by directly investing in ITC and sought the court’s directions to public sector insurance companies to sell their holdings in tobacco companies. The petition argued that while the government is committed to combating tobacco and its harmful effects, insurance companies continue to invest in ITC.
“Life” Insurance Corporation’s (LIC) investment in ITC is paradoxical, to say the least. Consider the facts. Tobacco is responsible for 13.5 lakh deaths in India every year. The total economic costs attributable to tobacco use from all diseases in India in the year 2011 for persons aged 35-69 amounted to a staggering ₹1,04,500 crore ($22.4 billion).
According to ITC’s 2018 Business Report, LIC holds 16.26 per cent shares and the second position among the top ten investors. Importantly, cigarettes account for 52.08 per cent of ITC’s gross turnover. LIC defended its holding in ITC Ltd saying that there was no law or policy that prevented insurance companies from investing in tobacco firms. While LIC may defend itself on legal grounds, it is on a weak wicket, both morally and ethically.
Interestingly, this petition omitted the important investor category of tobacco stocks — mutual funds that own shares in tobacco companies. It would be imperative to address this critical gap on a priority.
The country needs ethical investing to combat tobacco and an #ustoo movement by corporates who will stand up and proudly proclaim that they do not invest in tobacco. It is vital that the financial umbilical cord is severed — to save countless lives and costs associated with tobacco-related diseases. It makes for good economics too. Globally, the annual cost of tobacco is estimated at $1 trillion while global tax revenues are estimated to be $269 billion.
An analysis by Deutsche Asset & Wealth Management and Hamburg University of 2,200 empirical studies showed that the business case for environmental, social and governance (ESG) investing is well-founded.
As this movement gathers steam, companies will find it increasingly difficult to stand up to critical scrutiny and continue investing in tobacco. It does make for bad optics.
Will Indian corporates and state-owned companies rise to this health challenge? Hopefully, 2019 will herald this change and set the stage for the #ustoo movement.
The writer is a health communications specialist and former Senior Communications Officer with the WHO India.