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Pension funds are not duty bound to invest in tobacco FairPensions

Kent County Council’s response to criticism of its investment in tobacco companies may disguise a more complex reality, say responsible investment campaigners.

FairPensions, who recently published a report on investors’ legal duties, has questioned the argument that pension funds have an obligation to maximise profit at any cost.

Christine Berry, the author of the report, said:

‘Kent County Council’s position reflects a common misinterpretation of investors’ legal duties. It is all too easy to dismiss ethical concerns by invoking a presumed duty to maximise profit. In fact, this duty is often over-played: pension funds are legally bound to defend their members’ interests but this does not equate to a duty to pursue profit at any cost.’

She went on to say:

‘We all have an interest in getting the best possible pension but that isn’t the only interest at play. In this case, relevant considerations could include members’ ethical concerns or the cost of smoking to the taxpayer.’

FairPensions is also keen to emphasise the need for funds to avoid knee-jerk responses to concerns about the impact of their investments.

Ms Berry said:

‘There is often an assumption that excluding any investments will be bad for returns. In fact, many funds have successfully implemented exclusions on the basis that this had no significant impact on returns. We would hope that Kent County Council’s response is based on an informed analysis of the potential financial impact of responding to the concerns raised.’

FairPensions report on Investors Legal Duties can be found here.

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