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Dutch fund sells out of tobacco and Walmart

Dutch fund sells out of tobacco and Walmart

Mark Cobley

01 Jul 2013

The second-biggest Dutch pension fund, PFZW, has sold holdings in tobacco companies and US retailer Walmart worth more than €800m in total, the latest step in an ongoing trend among large Dutch investors to dissociate themselves from companies that fail to meet their responsible investments standards.

Pensioenfonds Zorg en Welzijn, the Netherlands’ €135bn healthcare workers’ fund, said today it was divesting all its holdings in the tobacco sector, despite several months of discussions with individual companies, which it said “failed to bring about the improvements desired”.

The holdings, worth €611m at the end of last year, were in companies such as Altria Group, the US maker of cigarette brands such as Marlboro; British American Tobacco, Imperial Tobacco, and Philip Morris, a spokeswoman confirmed.

In a statement today, Peter Borgdorff, director of PFZW said the “difficult relationship” between the healthcare sector and the tobacco industry was a factor in the fund’s decision.

The fund had raised concerns with the companies over the way tobacco is produced, in some cases involving child labour, and the way it is marketed, including the targeting of young people. The fund added: “PFZW believes the problems are typical of this sector.”

A spokesman for British American Tobacco said his company took child-labour issues “extremely seriously”. He said: “We firmly agree that children must never be exploited, exposed to danger or denied an education. We do not employ children in any of our operations worldwide and make it clear to all of our contracted farmers and suppliers that exploitative child labour will not be tolerated.”

He also pointed out that BAT was a founding member of the Eliminating Child Labour in Tobacco Growing Foundation, a partnership advised by the International Labour Organisation.

A spokesman for Imperial Tobacco said his company was a board member of the same foundation, and he added: “Through our partnerships with tobacco growers, suppliers and other key stakeholders we are working hard to eliminate the exploitation of children in the tobacco supply chain.”

A spokesman for Altria said it also participated in the foundation, and went on: “Altria’s companies do not condone the unlawful employment of children in the workplace, nor do we condone forced labour. Our companies promote these objectives within their supply chains by discussing our expectations on these issues and requiring that suppliers accept responsibility for their labour practices.”

A spokesperson for Philip Morris was not immediately able to respond to a request for comment.

Also this morning, PFZW’s investment manager, PGGM Investments, said it was selling €200m worth of stock in the US retailer Walmart.

PGGM manages money for five Dutch pension funds, by far the largest of which is PFZW, which also owns the investment firm.

In a statement, PGGM said: “The motives behind this decision are twofold: firstly, Walmart was not prepared to take PGGM’s concerns about the company’s tense labour relations in its domestic market into consideration and, secondly, the Walmart board was not willing to participate in fruitful dialogues with its shareholders.”

It indicated that union rights were a major factor in its decision: “The policy pursued by Walmart in the US restricts employees’ opportunities to organise themselves in trade unions. This is not only contrary to fundamental principles and rights at work, but also contrary to the codes Walmart has compiled for its own suppliers.

A spokesman for Walmart declined to comment, saying the decision to buy or sell its stock was a decision for shareholders.

Several large Dutch and Scandinavian pension funds have begun selling out of stocks in similar areas in recent years, beginning with a movement against cluster-bomb manufacturers in 2007. Last year, the Dutch government confirmed a legal ban on investing in such stocks. Several Norwegian investors have sold out of Walmart because of labour issues, including the country’s giant sovereign wealth fund.

In the UK, however, which has Europe’s biggest pension-fund sector, scheme boards have largely steered clear of ruling companies out on ethical grounds. This dates back to a 1984 ruling against the Mineworkers’ Pension Scheme, which many have interpreted as forbidding investment decisions taken for political, or indeed any non-financial, reasons.

PFZW has an existing list of more than 40 companies that it will not invest in, including makers of cluster-bombs and nuclear weapons, and certain firms excluded for being involved in human rights abuses. It has sold out of aerospace groups such as BAE Systems of the UK, France’s Thales, and resource stocks such as PetroChina or Vedanta Resources.

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