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The case against tobacco investment

Dr Bronwyn King from Tobacco Free Portfolios lays out the investment case against tobacco.
Published 17 Oct 2018   |   7 min read

For some, investment in tobacco just doesn’t make sense – it quite simply doesn’t meet the ethical principles on which their investment portfolio is based. Some super funds, such as Australian Ethical Super, have always actively excluded tobacco from all investment options as a matter of ethics. The norm, however, has been for investment portfolios to include tobacco and only exclude at the request of a member. But we know that member engagement in their financial matters is often low. Therefore, even though many Australians might care about health and prefer their finances not to support tobacco, relatively few adjust their portfolios to match their preferences. This is where leadership in the finance sector now comes into play and, happily, times are changing.

There’s an evident tobacco-free finance movement, heralded most recently with the launch of the Tobacco-Free Finance Pledge during the UN General Assembly in New York in September. The pledge had over 90 founding signatories – financial institutions representing over US$6.5 trillion in funds under management.

Whilst the ethical case for not investing in tobacco has always been strong, it has not been enough to sway many in financial markets. But now the investment case for holding tobacco has weakened because the once-stable sector has shown signs of volatility, and reputation risks of being associated with tobacco have escalated. As a result, many more are joining the tobacco-free finance movement.

A new ally

Tobacco has long been considered a health problem. It’s now over 50 years since the US surgeon general announced the unequivocal link between poor health outcomes and tobacco use – and even then, it was considered to be too late. We know that tobacco use results in devastating health impacts including lung cancer, heart disease, the loss of limbs and eye sight, and even respiratory problems in our children. Despite this knowledge the facts might still startle: 7 million people will die this year and up to 1 billion people this century because of tobacco. In Australia 15,000 people die each year. This is despite the persistent and gallant efforts of doctors, public health experts and governments across the globe.

A new ally that has traditionally worked against tobacco control is the finance sector. Tobacco companies have thrived through continued financial investment that has allowed their expansion and influence.

New investment considerations

As environmental, social and governance (ESG) practices have become a criterion for which investment might be made or withheld, leaders across the finance sector are using their power to do what they can to address some of the most pressing issues of our time – and tobacco is undoubtedly one of them.

There is a clear business case for excluding investment in tobacco. Failing to do so would expose investors to the following risks:


Unprecedented global cooperation to reduce tobacco use through the UN Tobacco Control Treaty: The World Health Organisation Framework Convention on Tobacco Control. There are 181 countries committed to implementing this treaty which consists of a long list of regulatory policies required to protect people from tobacco.  Examples include plain packaging regulations, which is being rolled out across the globe, as well as sustained tax increases on tobacco – the number one way to reduce the likelihood that children will start smoking


Class actions and litigation are challenging the tobacco industry business model of privatising profits while externalising the costs inflicted on society. Other legal challenges include a criminal case filed in May 2017 against the four largest tobacco companies operational in Holland, accusing them of aggravated assault and fraud (although prosecutors later declined to open the investigation).

Human rights

Financial institutions are increasingly focused on human rights and the tobacco industry’s fundamental conflict with the UN Guiding Principles on Business and Human Rights has caused many to exclude tobacco from their investments. The tobacco industry’s significant reliance on child labour is also under the spotlight as supply chains are increasingly scrutinised.


Investment in tobacco companies implies endorsement of the product itself and of the industry as a whole. Financial institutions across the globe are reconsidering this association.

A new certification

Many superannuation fund members are unsure about how their money is being invested. The ‘Verified Tobacco-Free’ certification stamp is a new program for Australian superannuation funds, being launched by Tobacco Free Portfolios in October 2018. Following an audit, funds that are tobacco-free can proudly display the stamp, allowing members to be confident that their money is not being invested in tobacco. This increase in transparency for superannuation fund members and the community at large is an important step in aligning consumer and community expectations with actual investment policies of the finance sector.

Australian Ethical has always been bold in its uncompromising stance on important social issues of the day. As with many social issues that take time, sometimes decades, to percolate through the community, the leaders have to be bold and courageous to take the first steps. When it comes to the issue of tobacco, Australian Ethical will always be acknowledged as a great leader – an organisation that was not just ahead of its time, but one that crafted the way forwards for the finance sector as a whole – initially in Australia and now across the globe.

Australian Ethical has never invested in tobacco companies. We have a zero revenue threshold for tobacco farming or tobacco product manufacture and strict limits on indirect involvement. You can align your super with your opposition to the tobacco industry by joining Australian Ethical today.


Australian Ethical acknowledges the Traditional Owners of the country on which we work, the Gadigal people of the Eora Nation, and recognise and celebrate their continuing connection to land, waters and culture. We pay our respects to Elders past and present and thank them for protecting Country since time immemorial.

See our Reconciliation Action Plan