AMP stops investing in tobacco
AMP Capital has refused to reveal how much worse off clients will be after its move to ditch nearly half a billion dollars in tobacco-related investments.
The beleaguered fund manager, which earlier this year revealed some of its customers were actually seeing negative returns on their cash investments, said on Thursday it had completed its $440 million divestment of tobacco manufacturing securities.
The move, described as the largest such divestment by a fund manager in Australia, was made under a new "ethical framework" announced in March last year that included the decision to divest from tobacco securities across all equity and fixed income holdings.
AMP collaborated with Tobacco Free Portfolios, the United Nations and other financial services companies to create the Tobacco-Free Finance Pledge, launched at an event at the UN General Assembly in New York overnight.
"As a global investment manager, we firmly believe in responsible investment and company engagement to drive meaningful change," AMP chief executive Adam Tindall said a statement.
"However in the case of tobacco no level of engagement can resolve the inherent dangers involved with their products. Our tobacco-free position, established in March 2017, reflects changing attitudes of our clients who don't want to be invested in harmful products."
Mr Tindall said AMP was encouraging all investors to "consider adopting their own minimum standards in relation to tobacco".
"Our ethical framework has shown it is possible to reconcile complex ethical issues in institutional investing while contributing to a sustainable future that creates long-term value for our investors, the environment and the community," he said.
As part of the 2017 commitment, AMP has also divested $130 million in securities representing manufacturers of cluster munitions, landmines, chemical and biological weapons.
A spokesman declined to say whether customers were directly consulted or how much the move would cost, although the $440 million represents a tiny percentage of AMP's $188 billion funds under management.
AMP is understood to have conducted polling of retail and institutional clients indicating majority support for the move, but the firm would not answer questions about the sample size or specific questions asked.
"AMP Capital has consulted extensively with its clients, who are widely supportive of the move to divest from tobacco securities," the spokesman said. "We are confident we can still deliver strong investment returns that meet client goals while meeting our obligations to be a responsible fund manager."
RMIT economics professor Sinclair Davidson slammed the decision.
"I'm not a fan of politically motivated divestments at all," Prof Davidson said.
"AMP is not employed to make moral judgments, AMP's job is to make money on behalf of their customers. By cutting customers off from legal and profitable business models, they're probably undermining the returns they can deliver."
Prof Davidson added that "to be perfectly blunt, AMP are in no position to be dictating morals to anyone else, given what we know about them".
"If they didn't want to expose themselves to certain industries, the correct decision is to hedge as opposed to divest," he said.
"Unfortunately this is becoming the short edge of the wedge. You're already seeing arguments about divesting from coal, tobacco, soon sugar and other products are going to be added to that list."
He questioned whether investment firms were opening themselves up to legal liability for breaching their responsibility to act in the best interests of their clients.
"What would happen in the future if people started suing these companies and saying to them, we could have gotten a better return if you'd invested in the sector?" he said.
"Super funds have started divesting from particular industries simply because they're politically unpopular. I'd imagine they'd be exposed to litigation. Their job is to maximise returns. Unless they can justify that in financial terms, I think they're abrogating their duties."
According to the Cancer Council, 15,500 Australians die each year from smoking-related illnesses. The World Health Organisation says smoking is the leading cause of preventable death, claiming more than six million lives annually.