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Malaysia’s Top Pension Fund Plans Tobacco Stake Exit, CEO Says

Malaysia’s $170 billion pension fund plans to sell its stake in British American Tobacco Malaysia Bhd. as it focuses on investing in assets deemed socially and environmentally responsible, Chief Executive Officer Shahril Ridza Ridzuan said.

The Employees Provident Fund has a 6.9 percent stake worth about 942 million ringgit ($234 million) in the Malaysia-listed company, according to data compiled by Bloomberg. EPF doesn’t have a specific timeline to sell its holdings, Shahril said.

“We are conscious that we don’t invest in gambling, alcohol or alcohol-related business,” Shahril said. “Historically, we have this stake in the tobacco company and that we will gradually over time look at disposing.”

The fund also won’t make any new investments in tobacco, he said.

A divestment would coincide with a broader global shift among money managers to increase exposure to investments considered socially responsible. Worldwide so-called sustainable assets under management grew 61 percent to $21.4 trillion from 2012 to 2014, according to a report by the Global Sustainable Investment Alliance. Yet Asia accounted for only $53 billion of the total — compared to Europe’s $13.6 trillion.

Malaysia’s stock exchange launched the FTSE4Good Bursa Malaysia Index in December 2014, comprising companies with “recognized corporate responsibility practices,” according to its website. The index, which includes Malayan Banking Bhd. and Petronas Chemicals Bhd., is down about 8.9 percent over the past 12 months, Bloomberg data show.

Malaysia’s sovereign wealth fund Khazanah Nasional Bhd. is considering paring 2 percent of its holdings in Tenaga Nasional Bhd., IHH Healthcare Bhd. and Axiata Group Bhd., people familiar with the matter said earlier this week. EPF owns shares in all three companies, and Shahril said the pension fund may look at increasing its stake should Khazanah sell.

“We don’t rule out the possibility,” Shahril said. “It all depends on whether the price makes it worthwhile for us to look at, from a risk-return point of view.”

The Kuala Lumpur-based fund recorded 44.2 billion ringgit of gross income from investments last year, 13 percent more than it earned in 2014, according its latest annual report. EPF had 684.3 billion ringgit in assets at the end of last year, with 51 percent invested in fixed income and 43.8 percent in equities, the report said.

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