Investment policy

Scottish Widows doubles disposal of ESG risks

Tobacco firms ‘risk becoming stranded assets’

Scottish Widows has doubled the disposal of ‘unethical’ assets to £3 billion, including a commitment to divest from tobacco firms and tighter rules around investments in carbon-intensive industries.  

The Edinburgh-based pensions and asset manager will not invest in any company deriving more than 10% of its revenue from tobacco and has updated its policy on extraction of thermal coal and tar sands.  

It claims it now has one of the most extensive screening policies yet implemented by a UK pensions provider.  

A series of bespoke screened indices for its passive funds were launched at a market opening ceremony today at the London Stock Exchange.

All tobacco manufacturers and major distributors are excluded, without hampering investments in companies from other industries that may derive a small amount of revenue from tobacco, such as supermarkets.  

The business has produced a paper outlining its rationale, explaining that tobacco holdings are irreconcilable with Scottish Widows’ strategy as a responsible investor and pension provider and that they pose an unrewarded investment risk. 

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Scottish Widows already excludes companies violating UN Global Compact principles and tobacco companies are a clear outlier here: they aren’t even allowed to sign up to these principles given their product’s huge detrimental effect on households, economies, and taxpayers, as well as concerns around widespread child labour in the industry supply chain.

Maria Nazarova-Doyle, head of pension and responsible investments at Scottish Widows, said:  “With responsibility for trillions of pounds worth of investments, it is imperative that the pensions industry champions a responsible approach to investing, creating strong financial returns for savers with the help of active stewardship while divesting from practices that threaten the long-term health of people and our planet.  

“Taking the long view, industries such as tobacco are at severe risk of becoming stranded assets, as they face intense pressure from investors, regulators, and consumers, and consistently fail to properly address the social impacts of their products and within their supply chain.  

“We stand by our belief that carbon-intensive sources of energy such as thermal coal and tar sands will ultimately be replaced by greener renewable sources such as wind or solar. As such, exiting these highly damaging areas and redirecting capital to more climate-aware investments makes perfect investment sense.” 

Implementing these changes, Scottish Widows has worked closely with FTSE Russell to construct a range of new bespoke screened indices for its passive funds which will be managed by BlackRock.

Alongside the tobacco and carbon exclusions, these new indices cover existing screens from Scottish Widows’ policy – including holdings in manufacturers of controversial weapons and United Nations Global Compact violators.  

The new indices will cover more than £20 billion worth of assets under management, and the launch is being celebrated at a market opening ceremony today at the London Stock Exchange.  



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