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Axa stubs out tobacco investments

Axa is giving up cigarettes, saying it “makes no sense” for the insurer to keep its €1.8bn portfolio of tobacco investments.

The French insurance group, which manages more than €1 trillion, will sell off its current tobacco shareholdings that are worth approximately €200m, while its bond portfolio worth about €1.6bn will be gradually wound down.

“This decision has a cost for us, but the case for divestment is clear: the human cost of tobacco is tragic; its economic cost is huge,” said Thomas Buberl, deputy chief executive at Axa.

“We strongly believe in the positive role insurance can play in society, and that insurers are part of the solution when it comes to health prevention to protect our clients.

Hence, it makes no sense for us to continue our investments within the tobacco industry.”

The move follow’s Axa’s decision last year to withdraw from coal assets in the face of the threats from climate change.

Ethical investing policies have prompted a number of the world’s biggest investors to blacklist industries including tobacco. Calpers, the Californian pension fund, has this year restarted a review into its 16-year ban on tobacco investments.

Norway’s sovereign wealth fund pulled out of tobacco companies in 2006, in a decision that it estimates has cost the fund $1.9bn in forgone profits.

Governments around the world are exerting pressure on tobacco firms, including in the UK, where this week plain packaging has been introduced on cigarettes in an attempt to reduce the appeal of particular brands to smokers.

However, these measures are yet to dent global earnings for the largest tobacco companies. The MSCI ACWI tobacco index, which tracks the industry across 46 countries, has delivered returns of 14.4pc over the past decade, far outperforming a 3.89pc gain in the broader MSCI share index.

A study by the Smith School of Enterprise and the Environment at the University of Oxford suggested that divestment programmes risk creating “stranded assets”, such as funds that are stuck in illiquid holdings in assets such as coal after others withdraw from the industry.

They also found that share prices in fossil fuels are unlikely to suffer directly from divestment efforts, as less ethically driven investors swoop in to buy the assets being sold.

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