Malaysia: Social Security fund plans to divest from tobacco

Malaysia’s social security fund, Employees Provident Fund (EPF), plans to dispose its stake in British American Tobacco. See report here. The fund has a 6.7% direct stake in the tobacco company and owns 0.7% via an external fund manager. The government is among the top investor in BAT. Besides BAT, the fund also has1,500,000 shares in JTI.

As a Party to the WHO FCTC, Malaysia is committed to implement strong tobacco control policies and measures, and divesting from tobacco is a welcome move needed for policy coherence. It is in the best interest of the EPF to make this move also because it invests in healthcare and owns about 12 hospitals in the UK.

FCTC Article 5.3 Guidelines, recommendation 4.7 states: “Government institutions and their bodiesshould not have any financial interest in the tobacco industry, unless they are responsible for managing a Party’s ownership interest in a State-owned tobacco industry.”

Divesting from tobacco is already being carried out in other countries. Many Australian social security funds have started divesting from tobacco over the past few years. Since 2012, Australian oncologist cum advocate, Bronwyn King has been instrumental in persuading more than 30 pension funds to adopt tobacco-free investment with total tobacco divestment of around AUS$1.8 billion. King is currently working with more than two dozen other super funds, insurers and fund managers. Divestments have intensified in recent times and it is now seen as a reputation and ethical issue for funds that continue to keep their investments in tobacco.

In 2014, Malaysia’s Finance Minister, during his National Budget speech, said environmental, social and governance (ESG) principles are becoming more important. Malaysia will start investing in ESG principles from 2015. Divesting from tobacco is in line with establishing a responsible investment climate in the country. Hopefully Malaysia proceeds with its plan and becomes the first country in the ASEAN to carry out divestments from tobacco.

For information on TI denormalization, check out SEATCA’s Tobacco Industry Watch website

Previous ASEAN Tobacco Watch updates can be found here