Does it matter that the Future Fund has invested over $200 million in tobacco shares?
Cigarette pushers, like it or not, have been strong market performers, with major stocks growing by more than 100% over the last three years in an otherwise dire equities market. The product, of course, remains legal in Australia. Should taxpayers be asked to accept a poorer return on their investment for the sake of avoiding a controversial product? Individual investors can make such decisions for themselves, but governments must make decisions in the national interest.
The extent to which the performance of socially responsible investments, or SRIs, outperform, match or underperform conventional investments is debated. Various studies point to wildly different conclusions, suggesting establishing a link between SRIs and particular kinds of investment outcomes is difficult. That would strengthen the argument that there is no demonstrable price to be paid for adopting a more ethical approach to investment.
The Future Fund is hardly the only Australian fund investing in tobacco or other stocks that would not feature in an SRI list. Most of us, via our superannuation funds, are investors in a wide array of industries and companies that many of us would have a problem with. Ignorance and disengagement conveniently shields from having to make any decisions as to what to do about it.
Perhaps the Future Fund board has run the sums on SRIs and workers would lose. They should say so if that’s the case. There’s no easy answers here, but more transparency in investment guidelines would help.
Surely the Government should lead by example in investing only in socially responsible activities. In addition to tobacco that would cut arms manufacture, gambling and coal.
The Future Fund Investment mandate has nothing to say about having to invest in Ethical/Socially responsible companies (only that the rate of return be at least CPI+3.5 and invested in financial assets), so the managers of the Fund are acting correctly.
The question should be whether the investment mandate should be changed to only allow investment in companies that are Socially responsible.
For myself, I don’t think it is the best option. Very hard to define exactly what makes a company socially responsible. Is it just publishing a socially responsible report along with the annual report? Is it a committment to gender equality, investing in local community, a committment to diversity or environmental sustainability? Or does it all come down to the product or service being provided? The question is important because a tabacco company like Philip Morris has a very strong positive ranking in regards to these CSR policies, even though their product is thought of as unethical by a lot of people.
But then, even that is fraught with danger.. Does the future fund stop investing in airlines due to their large carbon footprint, even though they are at the forefront of trying to make their industry greener? Or in defence conglomerates like BAE that make a large amount of products, only some of which can be defined as unethical, like landmines.
There is no easy answer here. Hence it is best for the fund to go for the highest returns and pay for the superannuation liabilities it is designed for. The end beneficiaries of these funds, can then decide to invest/spend the money as they see fit, based on their own moral and ethical standards.
The real question is why are tobacco companies still profitable ? Obviously more needs to be done to link their health to their customers health.
Perhaps those that have their retirement funded out of this deserve a say in whether they are prepared to take a lesser payout when they retire, but noone else.
Seems like a no brainer that the future fund should invest in ethical/ socially responsible companies.
There’s a very good example of what happens when state funded entities ignore social responsibilities. Just look at Oz state govts and poker machine revenues.