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Undoing the dark realities of tobacco

Tobacco is one of the greatest threats to human life we have ever faced, yet it’s been normalised and accepted for hundreds of years. The financial services industry has the chance to step up, and join a fight that is showing real results.

Dr. Bronwyn King’s epiphany is the stuff of folklore now.

A young doctor, horrified by the deaths of her patients from lung diseases, sets out to free the world from tobacco by engaging with ‘the missing piece’ in international tobacco control efforts, the finance industry.

From the first small step of withdrawing her own superannuation fund from investments in tobacco companies, her message has snowballed into a global phenomenon.

Today, insurers, pension funds, banks and fund managers – including AMP Capital, which was a founding signatory – have committed to withdrawing finance from the tobacco industry under Dr King’s Tobacco-Free Finance Pledge.

All up, there are now 141 signatories to the Pledge from 22 countries representing more than US$10.9 trillion – or approximately 10% of the world’s total assets under management1.

It is an extraordinarily important movement.

Tobacco is one of the leading preventable causes of premature death. Smokers face higher risks of cancer, cardiovascular disease, respiratory disease and a range of other health problems.

Smoking is a leading cause of illness and death in virtually every country in the world2 and has killed more than 8 million people in the last 12 months alone3.

The World Health Organisation (WHO) calls it one of the biggest public health threats the world has ever faced4, responsible for the deaths of 100 million in the 20th century and on track to kill 1 billion people in the 21st century5.

Here’s another fact: tobacco is the only legal consumer product that can harm everyone exposed to it and kills up to half those who use it as intended6.

Yet despite the facts, 1.3 billion people use tobacco7. Tobacco is cheap and heavily advertised. Worse, the health problems it causes are often delayed by years or decades after use, leaving its users complacent.

The Tobacco-Free Finance Pledge is a key initiative of Dr.King’s Tobacco Free Portfolios which encourages finance leaders to reconsider their relationship and financing of tobacco companies, targeting lending, insurance and investment.

The goal is for signatories to move towards a future where tobacco companies are ultimately divested from portfolios, denied insurance coverage and excluded from borrowing.

AMP Capital, a founding signatory to the Tobacco-Free Finance Pledge completed its own divestment of A$440 million worth of tobacco manufacturing-related holdings from its portfolios in 2018 under a new Ethical Framework8, representing the largest divestment of tobacco securities by a fund manager in Australia.

It was inspiring to see that leadership. The impact opened the door for more honest conversations around challenging sectors, whereby leaders are now willing to ask themselves ‘what is my baseline standard?’, ‘are there any companies that sit below the line?’”

– Dr Bronwyn King, founder, Tobacco-Free Portfolios


Tobacco control measures around the world are having an impact. WHO data shows that in 2000, around a third of the global population aged 15 years and older were users of some form of tobacco products. By 2015, this rate had declined to about a quarter.

If tobacco control measures are maintained, the rate of tobacco users should decline to about a fifth of the global population by 20259.

But the headline numbers mask some tragic detail.

One of the most concerning public health implications of tobacco is its effect on the poorest communities in the world.

Tobacco use is growing fastest in low income countries as population growth combines with tobacco industry marketing10. Some 80% of the world’s smokers live in low- and middle-income countries, with usage concentrated in the poorest communities.

Poorer smokers spend more of their income on tobacco than wealthier smokers and suffer most from tobacco-related illness11.

Health systems facing unprecedented pressure due to the COVID-19 pandemic are also suffering as countries continue to fight diseases caused and worsened by smoking.

The World Bank estimates the total economic damage of smoking – medical costs and productivity losses from death and disability – at more than US$1.4 trillion per year, or 1.8% of global GDP12.

Child labour is also a problem in the tobacco industry. The International Labour Organisation believes that child labour in tobacco production in some poorer countries “is rampant”.

Research conducted in Malawi revealed that 57% of all children in two tobacco producing districts were involved in child labour and among tobacco growing families, 63% of children were engaged in child labour13.

The environment is also a victim of the tobacco industry. Cigarette filters are made of a type of plastic and of the 18 billion bought per day, only a third make it into the waste management system. The rest are tossed. Cigarette butts are among the world’s most discarded plastic items, polluting oceans worldwide14.

We found the unique characteristics and health implications associated with tobacco products no longer met our minimum standards for investment under our Ethical Framework, leading to our divestment of A$440million in tobacco-related securities from our managed portfolios.”

– Adam Kirkman, head of ESG, AMP Capital


Dr King’s Tobacco-Free Finance Pledge goes beyond traditional investment tools like the integration of environment, social and governance (ESG) factors, company engagement and impact investing.

Signatories to the Pledge acknowledge the view that tobacco cannot be handled under regular ESG principles for three reasons.

Firstly, there is no safe level of tobacco consumption15. Second, tobacco is the subject of a UN treaty – The Framework Convention on Tobacco Control (FCTC) – that is legally binding on the 181 countries that are Parties to the Treaty to implement tobacco control measures.

Finally, engagement with the tobacco industry is futile, partly because success would mean the industry stopping the operation of its primary business model.

The Pledge, launched at UN Headquarters in New York in September 2018 is working.

Tobacco shares were once one of the world’s best performing sectors, with the MSCI World Tobacco Index returning 1,437% from the end of 1999 through 2015, according to data from Bloomberg16. But in the three years to June 2020, the index has declined 13.25% per year17.

Alongside tougher regulation and higher taxes, industry watchers put down the poor investment returns to increasing regulation, litigation and divestments by the global pension funds, banks and insurers that support the tobacco-free finance movement18.

From AMP Capital’s perspective, the move to tobacco-free portfolios has made good financial sense given those returns, but it was not originally about investment performance. Rather, AMP Capital took the view that ethical issues including ‘degrees of harm’ and type of engagement it undertakes with other industries is not capable of resolving the unique and inherent dangers associated with tobacco products.

Important Notes

While every care has been taken in the preparation of these articles, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) makes no representation or warranty as to the accuracy or completeness of any statement in them including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. Performance goals are merely goals. There is no guarantee that the strategy will achieve that level of performance. The information in this document contains statements that are the author’s beliefs and/or opinions. Any beliefs and/or opinions shared are as at the date shown and are subject to change without notice. These articles have been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. They should not be construed as investment advice or investment recommendations. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

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