Anger as council pensions cash in on tobacco

Despite a commitment to “socially responsible investment”, three of the region’s four funds have pumped more than £110m into British American Tobacco (BAT) and more than £500,000 in Japan Tobacco.

The investments have been slammed by health organisations, particularly in light of Government reforms which will see local authorities take on a much more significant role in health management this year.

Environmental and human rights campaigners called for a more ethical approach to investments after it emerged nearly £200m was being invested in global mining firm Rio Tinto, which has faced accusations of environmental damage.

The authorities have said that they are committed to socially responsible investment, providing they can achieve the equivalent returns of their present holdings.

The funds say they are bound by fiduciary duty – a legal obligation to act in the best interest of their members – but campaigners say that is a narrow and simplistic interpretation of financial law.

Christine Berry, policy officer at the charity FairPensions, said: “When it comes to ethical investment, myths and misconceptions continue to abound.

“It’s simply not true that pension funds have a fiduciary duty to maximise returns which prevents them from considering ethical issues. Funds can and should take on board their stakeholders’ ethical concerns as long as it will not significantly harm returns.”

Ms Berry criticised those funds which do not publish voting behaviour – as a major investor each fund can vote at the board meetings of the firms they invest in on issues such as the pay packages and bonuses for top executives.

The South and West Yorkshire funds publish their voting history; however the North and East Yorkshire funds do not.

“We applaud those funds who publicly disclose how they use their shareholder votes,” she said. “This gives the lie to the claims of others that it is not practical for them to disclose.

“Members and council taxpayers have a legitimate interest in what is being done with their money.”

This year will see the biggest overhaul of the NHS in more than 30 years as directors of public health are transferred to local government. Bills currently going through parliament collectively hand councils major responsibilities for community wellbeing.

Martin Dockrell, director of research and policy at Action on Smoking and Health, said: “In just a few months Yorkshire’s councils will take on new responsibilities for protecting public health and you have to ask how that squares with such large investments in Britain’s biggest killer. Council pension fund managers have a duty to invest in the best interest of their pension holders but they also have a duty to the best interests of their local tax payers.”

When asked to justify the holdings in BAT, a spokesman for the East Riding Pension Fund said they do not disclose the reasons for individual investments, and a spokesman for the West Yorkshire Fund said: “The fund has a legal duty to maximise its investment returns, and the tobacco sector has produced very good returns relative to the market in recent years.”