19th October 2018
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Fresh calls for SIC to drop unethical investments

Calls for Shetland Islands Council to stop investing in tobacco shares were renewed this week.

It was suggested at Wednesday’s special SIC meeting that, as the council begins sharing more services with NHS Shetland, impetus may grow for it to follow the health board’s lead in washing its hands of tobacco.

A joint SIC-NHS committee for delivering social care was recently created. While the council must strive to maximise stock market returns on its oil reserves and pension fund, some members argue that profiting from tobacco conglomerates could jar with its growing responsibility to champion public health initiatives.

“As we as a council move towards more integration with the NHS, it could be argued that we have a health interest which contradicts investing in tobacco,” councillor Billy Fox pointed out this week.

Leading health bodies, including the UK Faculty of Public Health, argue it is “untenable” for councils to continue buying shares in firms such as British American Tobacco (BAT).

Mr Fox told this newspaper: “It’s probably getting to the stage where there is sound reason to look at [whether to invest] in terms of tobacco companies.”

Ethical investment has long been a hobby horse of Lerwick South councillor Jonathan Wills. He was accused of sounding like a “cracked record” by councillor Robert Henderson during Wednesday’s SIC meeting.

Advocates of the status quo, such as councillor Allison Duncan, say fund managers’ advice that tobacco stocks are a good investment must be heeded.

Shares in BAT have risen by 433 per cent over the past decade, while Imperial Tobacco has enjoyed a 188 per cent rise. Both companies are major players on the FTSE100 index, where some of the council’s investments are kept in “passive” funds which seek to track the index’s overall performance.

Recently retired councillor Gussie Angus argued that buying tobacco shares was akin to “killing our beneficiaries”. Echoing that, Dr Wills said the good financial returns came at a high price – one Shetlander dies every week as a result of smoking.

“That’s their problem,” retorted Mr Duncan, who accused Dr Wills of harbouring “an obsession towards ethical investment”.

“My advice [to the fund managers] is, for goodness sake, put our money [wherever] it gets the best return,” Mr Duncan said. “If it should be tobacco, so be it.”

“Buy a whorehouse!” Dr Wills responded.

Speaking after the meeting, he told this newspaper: “The SIC already suffers because of the tobacco epidemic, due to lost time caused by tobacco-related illnesses, to say nothing of the many council staff who’ve died of tobacco over the years.

“If we hold shares in mining or oil companies, we can go to their annual meetings and ask them to stop destroying the Ecuadorean rainforest or polluting the Gulf of Mexico, but there [is no] way shareholders will force a tobacco company to stop producing tobacco.

“In this case the only option is to sell the shares. And I will keep on about it until we do, however many ignorant, unpleasant jibes I have to suffer from colleagues about ‘cracked records’ and ‘obsessions’.”

Quizzed by Dr Wills on Wednesday, Baillie Gifford investor Tom Wright said the company felt there was money to be made out of tobacco, a “legal, highly regulated and highly taxed” commodity.

“But there’s no getting away from the fact that tobacco is not a healthy product,” Mr Wright accepted.

Another investor, Black Rock, looks after 93 per cent of the SIC’s pension fund. But its job is to track the FTSE index – meaning selling tobacco shares is not an option.

“All we can do is work behind the scenes with company management on shareholder interest and environmental matters,” said Black Rock’s investment manager Graham Jung.

Councillor Drew Ratter said he was content with that explanation. “If something is legal and regulated, what measure would one come up with to define its ethicalness or not? I doubt we’d find a very good answer.”

SIC convener Malcolm Bell said it was a “moot point” and Dr Wills had “every right” to continue raising the matter.

Mr Bell is no fan of smoking, and did not dismiss the idea of ceasing to buy shares in tobacco firms. But he stressed the local authority’s duty to “steward Shetland’s public finances to the very best we can”.

“I’m not saying we should or shouldn’t [invest],” he said. “BAT is a big player on the FTSE. If we’re going to track the FTSE you have to have a stake in it. Actively managed funds are slightly different.

“We’re discussing our investment strategy at the end of the month. I’ve no doubt that will come up and we’ll have to make a decision.”

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2 comments

  1. As a newly retired investment advisor for some 30 years, I challenge the choice of passive investments and would recommend that active and passive funds are compared. There is little comparison and in view of the importance of these investments they should surely be managed by active fund managers and not passive!

    In addition, if SIC wish to consider the use of ‘Ethical’ funds, real research will be required into the performance and the degree of ethical choice.

    It would appear that some serious and good advice is required for the decision makers.

    Reply
  2. john Irvine

    Unethical investments? what about the millions already pumped into VE? look up the definition of unethical in any dictionary!

    Reply

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