Axa goes cold turkey, divesting €1.8bn of tobacco assets

Added 23rd May 2016

While the insurer takes a bold stance against big tobacco, its investment management arm will have a tougher time kicking the habit.

Axa goes cold turkey, divesting €1.8bn of tobacco assets

The role of health insurers is changing, Axa said in a statement Monday. “Healthcare, in the future, won’t be just about cure, it will be about prevention,” the company stressed.

In order to do its part as “a responsible health insurer and investor,” AXA declared it will sell its equity holdings in tobacco companies totalling some £0.15bn (€0.2bn) immediately and will stop all new investments in tobacco industry corporate bonds.

However, Axa plans to hang onto £1.24bn (€1.6bn) in tobacco industry bonds until they reach maturity, which some commentators suspect could take a significant length of time.

Axa Investment Managers' (Axa IM) tobacco holdings on behalf of third parties are also at odds with the group’s new ethical objective. Currently, funds sold by Axa Investment Managers (Axa IM) contain holdings in tobacco giants like British American Tobacco and Imperial Tobacco.

In response to this, Axa IM has stated “our activity reflects the demands of our clients including divestment from tobacco if this is requested by a client for their mandate.”

As “stewards of investments made on behalf of clients,” the investment management company said that it has to keep the long-term interests and long-term performance of its clients at the forefront.

“In particular, our engagement focuses on situations where a company’s strategy or performance on environmental, social and governance issues leads us to believe that there may be a material impact on the company’s performance,” the company stated.

Axa IM was also keen to add that it already offers a range of responsible investment (RI) funds which exclude tobacco stocks. It also mentioned that portfolio managers have access to a RI search tool, which provides “access to detailed environmental, social and governance analysis allowing them to data mine and to isolate specific ‘risks’ such as tobacco or carbon, as well as aggregated ESG risks.”

While Axa’s separation from the tobacco industry may not be as immediate as the group suggests, fund managers are taking notice and applauding the company’s decision to stub out tobacco industry investments.

Peter Michaelis, head of investment at Alliance Trust, for one, thinks “this is a bold, positive move from the world’s largest insurer and sets a strong example for other institutional investors. Tobacco kills around 6 million people each year and is described by the World Health Organisation as “one of the biggest public health threats the world has ever faced.”

Thomas Buberl, who will assume the role of Axa chief exeuctive in September, admitted "this decision has a cost for us, but the case for divestment is clear: the human cost of tobacco is tragic; its economic cost is huge."

"As a major investor and a leading health insurer, the AXA Group wants to be part of the solution, and our hope is that others in our industry will do the same," he said.




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