Australia - government’s Future Fund investment program investing in tobacco holdings..



March 14, 2011 - The Australian Greens, who helped Prime Minister Julia Gillard win power, want the government’s Future Fund investment program changed to prevent the holding of tobacco company shares.

“It makes no sense for a Federal Government fund to be investing in a way which is so clearly at odds with current health policy,” Greens Senator Rachel Siewert said in an e- mailed statement. “This revelation should provide us with an opportunity to re-visit the Fund and see what we can do to improve this investment strategy.”

Norway related News brief:
Norway - drops top cigarette makers from wealth fund...

The Future Fund, established five years ago to cover the pension costs of retiring lawmakers, judges and public servants, had A$147.7 million ($148 million) invested in 14 tobacco companies as of Dec. 31, 2010 according to portfolio holdings obtained by Bloomberg News through a Freedom of Information Act request.

The Future Fund’s holdings as of Dec. 31 include A$46.4 million in London-based British American Tobacco Plc (BATS), A$36.5 million in New York-based Philip Morris International Inc. (PM) and A$26.1 million in Lorillard Inc. (LO) The fund’s tobacco investments were held across 14 companies in nine countries, also including South Korea’s KT&G Corp., Japan Tobacco Inc., Gudang Garam TBK PT of Indonesia and Swedish Match AB, according to the Future Fund document provided to Bloomberg. Investment in tobacco companies represents 0.5 percent of its holdings in equities. The fund also invests in Imperial Tobacco Group Plc (IMT), of Bristol, U.K., which last year said it may take legal action against the government’s new proposals.

The investments are held as Australia introduces some of the toughest anti-smoking laws in the world, including becoming the first nation to ban brand names on tobacco packs. In addition to raising the excise on tobacco by 25 percent last year, the government banned the public display of cigarettes in stores.

Australia, where sales of tobacco products totaled A$10.9 billion in 2009, records about 15,000 deaths a year from related diseases, according to government statistics. Smoking is the largest preventable cause of death, according to the Australian Medical Association.

Nicola Roxon, health minister in Gillard’s Labor government, last month said smoking cost Australia’s A$1.3 trillion economy about A$31.5 billion each year in health care and lost time due to illness.

“My personal view is no one should invest in tobacco companies,” Roxon told the Herald Sun newspaper. “No one should invest in products that are such dreadful killers.

Australia bans the open display of cigarettes in shops, and cigarette packs carry graphic images of diseases blamed on smoking. Legislation mandating plain packaging, which would prevent the use of company logos, brand imagery or promotional text, will be introduced this year.

The government’s 25 percent increase in tobacco excise last year raised the cost of a packet of 30 cigarettes by about A$2.20 to about A$17.70. Single cigarette packet prices are now as high as A$20 depending on where they are bought. Small stores and service stations are more expensive, according to figures from the National Retail Association.

British American had 46 percent of the Australian retail market for cigarettes in 2006, according to a 2008 report by Cancer Council Victoria. Philip Morris had a 34 percent share and Imperial had 18 percent.

Reference: Australia's Greens Seek Change to Government's Future Fund Tobacco Stakes by Robert Fenner (rfenner@bloomberg.net), editor responsible for this story: Paul Tighe at ptighe@bloomberg.net), Bloomberg.com, 3/13/2011.

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