Pensions

Wednesday 23 July 2014

Pension fund has shares in tobacco, drink firms

Paul Melia

Published 22/10/2012|05:00

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STATE pensions will be part-funded in future years through investments in tobacco, alcohol, fast-food and munitions companies.

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The National Pension Reserve Fund (NPRF), established a decade ago to fund pensions for our aging population, now holds millions of shares in controversial companies criticised for their products and business practices, the Irish Independent can reveal.

The fund holds shares in at least six 'Big Tobacco' companies, nine major alcohol producers, fast-food giants such as McDonald's and companies involved in arms production, including nuclear weapons.

Other investments include shares in Foxconn, a Taiwanese company which assembles iPhones and has been dogged by allegations of "slave labour" conditions at its factories including employing under-age workers.

The fund's investment practices are in sharp contrast to the Government's plans to tackle obesity by encouraging healthy eating, and reducing smoking rates and alcohol consumption.

A trawl of the portfolio held by the NPRF shows it held shares in almost 3,400 companies on December 31 last, they include:

• Shares worth €440,000 in BAE Systems, which manufacturers Bradley tanks for the US army.

• Almost €2.7m worth of shares in Boeing, which produces missiles capable of carrying nuclear warheads with a range of 2,500km.

• Some €90,000 worth of shares in mining company Lonmin, 34 of whose staff were shot dead by South African police in August while protesting about working conditions.

• Shares in at least six tobacco companies, which produce popular cigarette brands worth €17m.

• Investments in 10 alcohol companies worth €18m.

• More than €17m in shares in Coca Cola and Pepsi Co, and almost €6m in McDonald's.

The fund also holds shares worth more than €2m in News Corporation, which was behind the UK phone hacking scandal that resulted in the closure of the ' News of the World' last year.

It had invested in companies which produced cluster bombs until 2008, but it has since sold these shares.

However, it does invest in more than a dozen companies black-listed by the Norwegian state pension fund because of their involvement in nuclear weapon production, tobacco or other "unethical" activities.

While some of these shares may since have been sold, the NPRF's annual report shows it also has an interest in several mining companies, some of which are accused of causing widespread pollution and environmental damage in third-world countries.

Ethical

A working group made up of officials from the NPRF, the Department of Finance and other government departments submitted a report on ethical investing to the Government in 2010.

The Department of Finance was unable to say what had happened with the report.

The fund was set up in 2001 to finance the State's future pension requirements. It invests in companies across the globe on behalf of the taxpayer, and the fund is worth €13.9bn.

A condition of the EU/ IMF bailout was that it invest in AIB and Bank of Ireland, and some €8.1bn worth of shares are held in both banks.

The fund rose in value by 2.1pc last year, compared with averages losses of 3.5pc in most Irish pension funds. Since 2001, it had grown by 3.5pc per year compared with 1.6pc for other funds.

A spokesman for the NPRF said it operated under a commercial investment mandate which did not allow it to take a view as to "whether stocks should be excluded for ethical reasons".

"However, the NPRF does recognise that the way in which companies manage environmental, social and governance (ESG) factors can affect their long-term performance and it has taken steps to integrate these factors into its ownership and investment decision making practices," he said.

"It has adopted a formal Responsible Investment Policy and is a founder signatory to the United Nations Principles for Responsible Investment (PRI)."

This included engaging with some 300 companies on these issues last year.

Irish Independent

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