Scottish Widows adds another £1.5bn in divestments as part of a new update to its exclusions policy, which includes a landmark pledge to divest from tobacco companies.
This additional divestment is in addition to the £1.4bn in earlier exclusions applied to Scottish Widows’ investments, bringing the total amount of the provider’s exclusions to nearly £3bn.
Scottish Widows, which manages £190bn in savings and investments for over six million people in the UK, will not invest in any tobacco company that generates more than 10 per cent of its revenue. This 10 per cent criterion excludes all tobacco makers and large distributors while allowing investments in companies from other industries, such as supermarkets, that may generate a modest amount of revenue from tobacco.
Tobacco assets are incompatible with Scottish Widows’ strategy as a responsible investor and pension provider, according to the company, and they represent an unrewarded investment risk. Scottish Widows has already excluded companies violating UN Global Compact principles.
Scottish Widows is reinforcing its exclusionary attitude toward carbon-intensive companies as the continuous and long-term displacement of coal by renewable energy sources continues. The company’s exclusions policy has been amended to reduce the bar for thermal coal and tar sands extraction from 10 per cent to 5 per cent of sales, reflecting the progress made by industry leaders who have drastically reduced their reliance on these extremely polluting fuels.
Scottish Widows has worked closely with FTSE Russell to create a set of new bespoke screened indices for its passive funds, which will be managed by BlackRock, to implement these improvements. These additional indices, in addition to the tobacco and carbon exclusions, include existing screens from Scottish Widows’ policy, such as stakes in contentious weapons manufacturers and UN Global Compact offenders.
The new indices will cover more than £20bn in assets under management, and their introduction is being commemorated today at the London Stock Exchange with a market opening ceremony.
Scottish Widows head of pension investments and responsible investments Maria Nazarova-Doyle says: “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.”