Leading the way: Newham Council becomes first local authority to join global movement for tobacco-free finance

Newham Council has become the first local authority scheme to join the UK’s biggest pension funds, USS and the UKs largest master trust, Nest, along with pension schemes, endowments and trusts adding up to a total of £10.9 trillion globally that are all committed to tobacco-free finance.

The London Borough of Newham Pension Scheme (“The Fund”) is a high performing fund. The Fund is also very conscious of its responsibilities as an investor, and is committed to demonstrating good corporate governance and responsibility via its investment strategy.

The recently completed an Environment and Social Governance (ESG) review, recognising that companies that have strong ESG policies and processes tend to perform better over the longer term. The Fund also seeks to collaborate with other Local Government Pension Scheme (LGPS) funds and investors to make an impact in terms of responsible investment that works in lock-step with its fiduciary responsibilities.

Councillor Nareser Osei, Chair of the London Borough of Newham Pension Scheme, said: “The Fund introduced tobacco investment exclusion as part of its Statement of Investment Principle in 2008/09 due to the risk that tobacco companies may face large liabilities from outstanding court actions. Subsequently, other pension funds came on board and announced similar pledges. This has proven to be a good decision as tobacco company stock values have declined steeply over recent years.

“I am proud that Newham is leading the way among local authorities in embracing the global movement for tobacco free finance.”

The Tobacco-Free Finance Pledge launched in 2018 during the United Nations General Assembly in New York, to encourage the finance sector to consider the negative environmental, financial and social impact of tobacco companies, and work in partnership to move their investments out of tobacco.  The Pledge has 143 Signatories representing more than US$ 10.9 trillion across 26 different countries.

Dr Rachel Melsom, UK Europe Director Tobacco Free Portfolios, said; “I am delighted that Newham are leading the UK Local Government Pension Schemes in highlighting their commitment to sustainable finance, which by default means tobacco-free. In signing the Tobacco-Free Finance Pledge, Newham are joining other global leaders adopting this position.”

Barnett Waddingham, the UKs largest independent professional services consultancy, has supported the London Borough of Newham Pension Scheme to put policies in place to become the first local authority to sign the Tobacco Free Finance Pledge in the UK.

Pete Smith, Senior Investment Consultant at Barnett Waddingham, said; “As those running pension schemes continue integrating ESG into their investment strategies and turn their minds to the issues, more are reviewing their position on tobacco holdings.

“As independent advisers we are supporting our clients get policies in place to achieve tobacco free portfolios. Looking more widely, a growing number of funds with an ESG focus are also excluding tobacco, making it a relatively easy exclusion to apply in practice.

“As the first local authority to sign the pledge, Newham are leading the way for their fellow LGPS schemes.”

Published: 11 Dec 2020