Tuesday, 14 September 2010

Unethical investments by councils

London councils have been found to be investing pension funds in tobacco, discovers the Evening Standard, earning up to 6 or 7 per cent: three or four times the return of a standard deposit account. 
“So long as you don't have a conscience about the environmental or medical impact, tobacco is a very good investment, yielding six or seven per cent compared to one, two or three per cent in a deposit account.” There is increased pressure on local authority pension funds to perform because they are almost all in deficit with a combined “black-hole” of £10 billion, according to an audit carried out by the Standard.
Naturally the health charities have cried foul. But the pension deficit is real. 

Their shock also seems genuine. But like almost everyone else in the business of prohibition and bans, they seem incapable of looking over the border at what is happening on the other side of Hadrian's Wall. In Scotland we have been aware of this problem for years. Highland Council sought legal advice last year and was told in no uncertain terms that it would have to make up any deficit if it failed to take the best investment deal on the market. Their legal duties to take on such investments outweighs the considerations of ethical investments. Should the council vote to put ethical investment first: 
Those Councillors who voted in favour of such a decision could be liable to the penalties available following an audit, namely, censure, suspension and disqualification.
The Scottish Parliament pension scheme has also had tobacco involvement (as well as in other controversial areas, such as Mugabe's regime) and the Parliament has sought to arrange matters to minimise such involvement but are still under a fiduciary duty to maximise returns. A larger fund would allow their fund managers Baillie Gifford to give them more choice of investment and any concession made by Baillie Gifford to arrange a more ethical deal for their fund incurs a cost.

It's tough at the top, man! 

I haven't discovered yet whether all the other councils in London and Scotland simply haven't been caught out yet on tobacco/other unethical investments, or they are short changing their employees by investing in less than adequate pensions? 

This just seems a further confirmation that the economy relies on tobacco far more than its would like to admit that it does. Both anti-smokers and people on our side of the argument have expressed outrage about tobacco investments by authorities that campaign against smoking. Both sides talk of hypocrisy and demand that the situation is corrected.

Personally I find it galling that the likes of Andy Kerr and Jack McConnell and their successors will earn handsome payouts from tobacco investments, while those who have paid into those tobacco coffers for decades have had their social routines disrupted, their lives turned upside down and their businesses destroyed.

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