The decision was made after the trustee’s reviewed the expected environmental, social and governance (ESG) risks of the products in a broader investment analysis.
“VicSuper takes social and environmental considerations into account alongside economic considerations,” Michael Dundon, chief executive of VicSuper said.
"With tobacco products imposing a significant burden on society in terms of healthcare and environmental costs, the board and management team at VicSuper feel it is the right decision to move away from investing in this industry,” he added.
It represents a broader move within the funds management industry of trying to properly account for ESG risks in their investment strategies.
Recently Franklin Templeton signed the United Nations Principles for Responsible Investment (UNPRI) and expanded their ESG team.
“I think responsible investing in the UNPRI has been an issue for quite some time for institutional investors,” Maria Wilton, managing director of Franklin Templeton Australia told InvestorWeekly.
Templeton believe that ESG risks should sit side by side with the broader investment analysis.
“I think that ESG is seen as an investment issue, a mainstream investment issue ... I think that is the correct place for it,” Mrs Wilton said.
The decision by VicSuper was collectively supported by the board and shows that some funds are increasingly taking into account their ‘social and environmental impacts’ of investing.
“The board did not make this decision lightly. We had an informed discussion about the impact of this decision on VicSuper Fund, the potential returns for members, and the consequences of continuing to invest in companies that produce such a harmful product,” Barbra Norris, VicSuper's chairperson stated.
“It was unanimously decided that VicSuper should discontinue investing in companies that manufacture tobacco products."
The current industry super investment in tobacco sits at around 0.5 per cent of the fund’s total investment portfolio.
