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Robeco puts tobacco on exclusion list

Robeco puts tobacco on exclusion list

08-03-2018 | Insight

Robeco excludes investments in the tobacco industry from its mutual funds. This is a logical next step in its Sustainability Investing approach.

  • Carola van Lamoen
    Carola
    van Lamoen
    Head of Active Ownership
  • Sylvia van Waveren
    Sylvia
    van Waveren
    Engagement Specialist

Speed read

  • Society’s stance is increasingly negative towards tobacco
  • Engagement will not lead to fundamental change
  • Tobacco exposure in funds was already relatively low

Robeco has been a leader in Sustainability Investing (SI) for years. Not only are Environmental, Social and Governance (ESG) considerations fully integrated into its investment processes, active ownership also plays an important role, as dedicated specialists vote at Annual General Meetings of listed companies and actively engage with companies in the investment portfolios to improve their sustainability profile.

Robeco already excluded tobacco from its sustainable fund range. This exclusion is now extended to the mainstream Robeco funds, including sub-advised funds. The exclusion does not apply to client-specific funds and mandates, where the client’s exclusion list is leading.

Reasons for the exclusion

The harmful effects of the tobacco industry are increasingly exposed. The World Health Organization estimates that by 2030 tobacco will become the world's biggest single cause of death and disease, killing 10 million people each year. In 2017, the UN Global Compact excluded tobacco companies from participating in the initiative. Clients are increasingly unwilling to accept investments in tobacco.

Robeco takes its responsibility as an investor seriously and actively engages with companies it invests in. As a result, exclusion is only applied when other means are exhausted. In the case of the tobacco industry, engagement will not lead to fundamental change, as tobacco companies are not expected to stop producing cigarettes. Therefore, for Robeco, investing in tobacco is no longer compatible with the company’s commitment to SI.

As some funds had already divested tobacco, investments in tobacco and related companies had already decreased to 0.22% of total assets in funds managed by Robeco.

Peter Ferket: “Robeco has been at the forefront of SI since the 1990s and sees sustainability as a long-term force for change in markets, countries and companies. Given the significant international concerns about the risks posed by tobacco and in view of recent developments, such as the UN Global Compact’s decision, we think the time is ripe for excluding tobacco altogether.”

Carola van Lamoen: “Excluding tobacco is a logical addition to our Sustainability Investing approach; it complements a diverse set of SI instruments such as ESG integration, active ownership, impact investing and our existing exclusions.”

Scope of the exclusion

The exclusion applies to all listed companies that are involved in the production of tobacco or significant components of cigarettes. The process of excluding tobacco stocks will be completed by the end of the third quarter of this year.

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