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Doctor delivers $1.2 billion blow to tobacco – and counting


In mounting its noisy counter-attack against cigarette plain packaging, the tobacco industry has appeared largely oblivious to the emergence of another potent threat to its long-term viability.

Since 2010 Melbourne-based radiation oncologist Dr Bronwyn King, from the Peter MacCallum Cancer Centre, has been steadily chipping away at the tobacco industry’s investor base, so far convincing Australian superannuation funds to unload $1.2 billion of tobacco company shares.

While it sounds like a lot of money, Dr King herself admits that it is small change for the industry.

But the fact that in just four years Dr King’s Tobacco-Free Investment Initiative has helped convince 16 major superannuation funds – including the $43 billion First State Super fund, one of the nation’s largest – to divest their tobacco holdings is seen as a promise of great potential.

As Dr King tells it, it all began virtually by accident.

Until a chance exchange at the end of an otherwise standard conversation with a superannuation consultant in 2010, Dr King was oblivious to the fact that her super funds were being invested in tobacco stocks.

It was only when the consultant mentioned the option of a fund that did not include shares in mining, tobacco or alcohol stocks that she became aware some of her super funds were being invested in tobacco companies.

“Tobacco?” Dr King recalled saying, to which the consultant replied, “Yes, everyone is investing in tobacco.”

It was a confronting moment for the radiation oncologist, not least because of her early experience at Peter MacCallum working in the lung cancer unit, where she witnessed first-hand the devastating health consequences of smoking.

Her superannuation fund, Health Super, was the default superannuation fund for Peter MacCallum employees, and its investments in tobacco shares were “a terrible fit for me and my colleagues, my hospital and other hospitals around Australia”.

The fact that such investments were common in the superannuation industry only added to Dr King’s concern.

“From then on I really felt obliged to try to do something about it, that I should at least try,” she said.

Dr King raised the matter with the-then Peter MacCallum Chief Executive Officer, and a day later found herself booked in to make a presentation to Health Super’s executive team on the issue.

At the time, the super fund was in the throes of a year-long acquisition by First State Super, and nothing further happened until the transaction was finalised.

Once the transaction was completed, First State announced it had divested itself of all $200 million tobacco company shares it had held.

For Dr King, it was “a great moment. First State showed great leadership, and it started a conversation in the [superannuation] industry”.

Soon after, she had a meeting with First State CEO Michael Dwyer at which he agreed to facilitate introductions with key figures in the super industry.

Mr Dwyer arranged introductions for Dr King with key figures in the superannuation industry, and in the ensuing three years she has made numerous presentations to superannuation fund boards, fund managers and peak industry groups pushing the tobacco free investment message – something that five years ago she would never have imagined doing.

While Dr King’s motivation to take on this cause is clear – an abhorrence of the enormous, an avoidable, harm caused by tobacco – the reasons why super funds decide to rid themselves of tobacco shares is more mixed.

For funds where a significant proportion of members are health workers, the decision has been reasonably straightforward because such an investment sits at odds with professional ethical standards.

But funds have also divested themselves of tobacco shares because of risk.

The risks confronting investors in tobacco are multiple – governments are increasingly introducing laws and regulations aimed at reducing smoking (such as excise increases and smoking restrictions); there is the risk of litigation against tobacco companies that could involve multi-billion-dollar compensation claims; and there is a reputational risk for those (governments, funds, political parties, individuals) who hold tobacco shares.

There are also less obvious concerns that can lead funds to divest their tobacco shares.

Dr King said reports that children were used to help harvest tobacco in many producer countries was a deal breaker for a fund that had as part of its mandate the exclusion of any investment in child labour.

She said another fund was horrified when she pointed out that the Dow Jones Sustainability Index it used as an investment option included shares in British American Tobacco.

The cause of tobacco disinvestment was given a fillip last year when the $82 billion Future Fund dumped $222 million of tobacco shares under sustained pressure from the Australian Greens and public health groups, citing tobacco’s “very particular characteristics including its damaging health effects, addictive properties and that there is no safe level of consumption.

“In doing so, the Board also considered its investment policies and approach to environmental, social and governance issues,” then-Future Fund Chairman David Gonski said.

Dr King feels the move toward disinvestment in tobacco is getting to the point where it is becoming a competitive disadvantage for funds to hold tobacco shares, and she is keen to make an even bigger dent in estimated $7 billion of investment the local superannuation industry still holds.

She has been aided in her task by what she considered to be the unique characteristics of tobacco that make it a much clearer and obvious target for disinvestment than other potentially harmful products such as alcohol.

Among these are its proven harmful and deadly effects (“there is no safe level of consumption”), and the fact that the tobacco industry’s sole trade is in a product proven to be harmful to health.

Dr King, whose efforts were recognised by the Thoracic Society of Australia and New Zealand when it presented her with the 2014 President’s Award, is hoping to eventually take the cause of tobacco industry disinvestment international.

But for now, she said, there was plenty more still to be done in Australia.