Financial institutions from around the world along with global pension funds, sovereign wealth funds, foundations and university endowments have launched the Tobacco-Free Finance Pledge, to encourage adoption of tobacco-free policies across lending, investment and insurance industries.
The ultimate aim is to reduce the millions of deaths due to tobacco-related illnesses, which number 7 million a year worldwide and are forecast to reach a total 1 billion this century, according to a press release.
One hundred twenty companies and institutions endorse the pledge including Natixis, BNP Paribas, AXA, Trilogy Global Advisors, ABN-AMRO, California Public Employees Retirement System (CalPERS), the Irish Sovereign Investment Fund and the Bank of New Zealand.
In addition to encouraging adoption of tobacco-free policies in financial sectors, signatories to the Tobacco-Free Finance Pledge commit to:
- Collaborate to raise awareness of the issue of lending to, investing in and insuring tobacco companies
- Encourage the alignment of lending, investment and insurance policies with the aims of the United Nations’ Sustainable Development Goals and the World Health Organization Framework Convention on Tobacco Control.
- Consider forming or supporting partnerships within or across sectors to promote tobacco control initiatives.
- Help guide a widespread transition toward tobacco-free finance by supporting activities that build knowledge and understanding of tobacco-free finance
- Encourage more organizations to become signatories to or supporters of the Tobacco-Free Finance Pledge.
Signatories and supporters also pledge to gather again in two years with an expanded global network.
In conjunction with the launch of the Tobacco-Free Finance Pledge, MSCI, a leading provider of indexes and portfolio construction and risk management tools and services, introduced a suite of global stock indexes that exclude tobacco-related investments.
The free float-adjusted market-cap weighted indexes are designed to be used as a benchmarks for investors who want to exclude stocks involved in tobacco production from their portfolios. They are part of MSCI’s standard ESG index module offering and make it easier and cheaper to implement tobacco-free investing in both passive and active portfolios, according to MSCI.
The indexes are:
- MSCI ACWI ex Tobacco Involvement Index
- MSCI World ex Tobacco Involvement Index
- MSCI EAFE ex Tobacco Involvement Index
- MSCI Japan ex Tobacco Involvement Index
- MSCI EM ex Tobacco Involvement Index
Companies that produce tobacco products or derive 5% more of their aggregate revenue from the distribution, sale or supply of tobacco-related products are excluded from the indexes.
“There is growing demand for exclusionary indexes globally, including interest among the world’s largest pension and endowment funds, for tobacco exclusion benchmarks,” said Deborah Yang, Global Head of ESG Indexes, in a statement.
“The indexes make makes a tobacco exclusion investment strategy easier to implement, and keeps the cost of adoption low, reducing hurdles to removing tobacco for both passive and active portfolios.”
— Check out Is Fixed Income ESG Investing the New Frontier? on ThinkAdvisor.