Pension rethink over tobacco investment

The investment policy of Scottish Borders Council’s pension fund could be reconsidered after it emerged it has shares worth £2.3million in British American Tobacco (BAT).

That equity holding in the FTSE-listed firm is revealed in the annual accounts of a fund whose membership comprises 9,500 past and present staff of the council and 11 other employers, including the Borders Sport & Leisure Trust, Borders College and the Scottish Borders Housing Association.

The fund is administered by a committee, comprising seven elected members of a council which, on its public health webpage, stresses its mission to “improve health and reduce health equalities”.

At its Newtown headquaters, SBC hosts the joint health improvement team with NHS Borders, which runs the Quit4Good smoking cessation service. The two organisations, which also share and jointly fund the post of director of public health, are also combining through a joint integration board to deliver health and social care from April 1 next year.

The pension accounts for 2013/14 list the BAT investment as the seventh highest single equity holding in a fund valued on March 31 last year at £486million – up £40million on the previous year.

Other major holdings include £4.3million in Prudential Assurance and £3.6million in Google.

A spokesman for the council confirmed this week the BAT holding remained intact, although he explained that the fund’s value, at December 31, 2014, had risen to £520million with just 0.7 per cent invested in tobacco companies.

He said: “The council acknowledges there is an ongoing issue between the objectives of the council as the body providing a wide range of public services, including a public health remit, and its role in administering the pension fund. The topic of investment in tobacco and the wider socially-responsible agenda in its strategy is considered by the committee when updating the fund’s statement of investment principles.”

He said that when that was last updated in 2013, the committee decided investment managers should have “unconstrained mandates, but be encouraged to constructively engage with companies as the most effective means of influencing their social and environmental policies”.

Noting that actuaries had undertaken a three-year valuation of the fund, he said: “This provides a further opportunity to review [the principles]…As part of this review it will be appropriate to consider whether or not it would be possible to adopt more explicit exclusions.”

Councillor Catriona Bhatia, SBC’s depute leader and chair of the joint integration board, admitted she had been unaware of the extent of the tobacco investment.

But she added: “Socially responsible investing is complex and a challenge for many local authorities who manage pension schemes.

“Many companies which are household names make and sell alcohol and tobacco products, foods with high sugar content and formula milk. Should the pension fund then not invest in these companies?

“The fund has a primary responsibility to ensure there are sufficient funds to provide for its future pensioners and their dependents, and that is the key influence on what investment decisions are made.

“With the updating of the statement-of-investment principles, there is an opportunity for the pension fund committee to consider this again.”