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I founded and co-founded a couple of companies: Redington and mallowstreet; I write about issues of the day that touch me and make me think. Mostly about how to make things better.

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Bonfire of the Insanity!

AXA vows to disinvest Euros 1.7 billion of tobacco related assets

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Time’s up!

Something out of the ordinary happened in Geneva on Sunday night.  AXA, one of the world’s largest insurance companies, announced its intention to divest Euros 1.7 billion of its tobacco industry assets.

It all went down at a dinner reception in Geneva’s stunning Beau Rivage Hotel, where leading health professionals gathered before the start of the 69th World Health Assembly. An impassioned speech from HRH Princess Dina Mired of Jordan stressed the urgency of getting to grips with the Non-Communicable Diseases – cancer, high on the agenda. At the same event, AXA’s incoming CEO, Thomas Buberl explained the firm’s rationale for turning its back on tobacco investing:

“This decision has a cost for us but the case for divestment is clear: the human cost of tobacco is tragic, the economic cost is huge.”

It’s a hard grind finding asset returns in these days of super-low yields and negative interest rates, and tobacco is a sure thing if you want juicy yields (who doesn’t?). Shunning a high-returns asset class like tobacco is a major statement of intent – especially when that asset class is a staple fixture across institutional investment portfolios. As Alice Steenland, AXA’s Head of Corporate Responsibility, put it:

“We are aware of the past performance of tobacco investments. This is a decision we are proud to make. It is a sunset industry. More and more countries are going to put controls on it.”

What’s the big deal?

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So what exactly is the big deal with tobacco and the vast industry that supports it? Surely, if people want to enjoy an occasional cigarette, that’s their own business? Gone are the days when smokers made non-smokers’ lives a misery. Hasn’t the 100% smoking ban in restaurants, clubs, bars, theaters, planes, trains and anywhere else indoors addressed the “anti-social factor”? In an era of societal tolerance and understanding, why get worked up about ordinary decent folk enjoying a cool quiet smoke outside? What’s the problem?!

If that’s still your perspective, then you haven’t met Dr Bronwyn King – the passionate and compelling CEO of Tobacco Free Portfolios. Dr King is a radiation oncologist in Melbourne, Australia who spends most of her time treating cancer patients, many of them with terminal lung cancer. In other words, she knows what the end result of the occasional cigarette looks like. It’s not pretty. And, when she is not in the hospital, Dr King is on a mission to shut down the tobacco industry. Globally and forever. It’s a Big Hairy Audacious Goal, to be sure, but it is happening!

She cites many powerful reasons why the tobacco industry needs to be put out of business yesterday.

Here are five of them:

Reason One: Used properly, tobacco will kill 6 million people this year. If you use tobacco the way its manufacturers intend, you will suffer ill health that has a good chance of resulting in your premature death. It is absurd and unacceptable that any responsible asset manager or insurance company knowingly and intentionally invests in an industry whose primary purpose is profit from extreme harm.

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Reason Two: If nothing changes, tobacco is on track to kill 1 billion people globally this century. That’s insane! The fact that it is going to happen on our collective watch is something that should shame us into action. Many of those doomed are currently children in developing countries including Brazil, China, India, Indonesia or Papua New Guinea (where 44% of 15 years olds are smokers). As long as there is a tobacco industry there will be children who smoke.

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When your pension fund invests in tobacco stocks or bonds, you are participating in this travesty. Why would you do that?

Reason Three: It is an inconvenient truth that the tobacco industry relies heavily on the use of silent child labour. Most of us would be appalled to find that our favourite jeans were made by an anonymous child toiling in abject poverty somewhere on the other side of the planet. But, somehow, no-one is that fussed about the fact that the tobacco leaf is, in many places, harvested by children. And, by the way, the tobacco is slowly ingested through their fingers directly into their bloodstream. Unsurprisingly they suffer permanent damage. Green Tobacco Sickness. Why would you knowingly invest in a product that seriously harms children on a massive scale?

Reason Four: The tobacco industry is routinely subsidized by governments around the world. If you had just landed from Mars and you were taken directly to a full technicolour presentation on The Ravaging Effect of Tobacco on the Population of Planet Earth, your first question would be:

Surely your mighty leader is taking action to stamp out this destructive trade?

On learning that, au contraire, the mighty leaders permit and quietly encourage investment in, and cultivation of, this evil weed on massive scale, you would presumably get back on board your space craft and swiftly head off in search  of moral and intelligent life in another galaxy far, far away.


Reason Five: In no circumstances would we (the intelligent, thinking, caring World) today, knowing what we now know, collectively sanction and encourage the global production and investment in tobacco. The very idea is unthinkable. In other words, we only do it because this is all we have known. But one hundred years ago, death from lung cancer was almost unheard of. One hundred years from now, the world will look back on these tobacco /lung cancer ridden years and wonder at The Tobacco Madness.

When you add it all up, says Dr King, there is self-evidently no justifiable reason for investing in tobacco. That’s the long and short of it. It belongs on the same Banned! list as guns and you-know-what. That doesn’t mean every fund manager, pension plan board or insurance company has the guts to take a stand. Selling down all tobacco assets would mean having to explain your decision to some hungry, dissatisfied, shareholders; to your institutional pension plans who might move their assets to another, less fussy, asset manager; and to every investor who is only interested in risk and return. Maybe. But Cary Adams, chief executive of Union International Cancer Control, (UICC) put it like this:

“We need companies like Axa to signal that investing in an industry which kills its customers is simply the wrong thing to do, and this announcement … is a milestone step in the right direction.”

Kudos to AXA for having the French equivalent of cojones to disinvest Euros 1.7 billion tobacco stocks and bonds. There’s a lot further to travel on this road, but it’s a bold first step for which they should be congratulated. BIG respect to Dr Bronwyn King for her relentless drive to change the world and for having those initial conversations with AXA’s supremos, and hats off to UICC for the teamwork and vision that helped make it happen.

Change is coming

For all those pension funds, asset managers, insurance companies and private wealth managers that have struggled to engage meaningfully with this issue, change is coming and it is coming soon. The plethora of excuses are looking more and more like what they are: hollow reasons to keep those returns rolling in at all costs.

If a gigantic insurance company can overcome the barriers to action – real and imagined – then so can everyone else. The Bonfire of The Insanity has begun.


Footnote 30 May 2016: As if on cue: Universities Superannuation Scheme hauled over the coals for investing in tobacco assets



8 comment on “Bonfire of the Insanity!

  • Dr Rachel Melsom
    May 29, 2016 | 10:29 am

    Excellent articulation of the issues Dawid. Thank you for your ongoing support and desire to enable change.
    The greatest respect is paid to Axa for highlighting that the tobacco industry is one we cannot continue to invest in if we care about the health of future generations.

  • Adrian Mackaay
    May 29, 2016 | 11:36 am

    Interesting, thanks. Would you support a similar stance against the sugar industry?

  • Gildas Surry
    May 29, 2016 | 9:10 pm

    Thank you for highlighting this. From now on I will monitor more closely the lending activity by banks to the tobacco industry and factor that in as part of our investment process

  • Sylvain Vanston
    July 12, 2016 | 4:39 pm

    Dear Dawid, I can confirm that you have managed to capture perfectly what made us, at AXA, take this decision. We really approached this from a broader “societal” perspective. The more we looked at the sheer extent of the damage and at our own strategic inconsistency – being a tobacco investor and a health prevention player – the more evident it became we had to cut ties with this industry. This was a first mover effort but we hope others will come to the same conclusion, despite the investment returns. Your analysis in this regard is very helpful. Best regards, Sylvain Vanston (AXA Group Strategy, Sustainability & Public Affairs team).

    • Dawid Konotey-Ahulu
      July 15, 2016 | 4:42 pm

      Dear Sylvain, AXA’s courage to cut ties with the tobacco industry and its vulnerability in acknowledging the “strategic inconsistency” is very powerful. When an industry giant like AXA takes such a big step towards doing the right thing, it makes it impossible for other financial institutions, insurers and pension schemes to hide behind their anachronistic smokescreens of sophistry and impenetrable legalese. Congratulations for having the guts to show the way.

  • Dr Bronwyn King
    July 21, 2016 | 12:07 pm

    It’s time to forge genuine partnerships between the health, government and finance sectors, to comprehensively address the tobacco epidemic. Delighted to stand side by side with AXA to take a giant step forwards on this issue. Great piece Dawid.

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