BACKGROUND: ESG (Environmental, Social and Governance) investing assumes that financial performance of the organization is affected by environmental and social factors and thus have traditionally grouped the Tobacco business with environmentally harmful industries. Tobacco business are ethically and morally questionable with high litigation and regulatory risk. In 2017, the UNPRI decided that tobacco was fundamentally inconsistent with the UN Global Compact and launched the Tobacco Free Finance Pledge. Global examples of pension funds divesting from tobacco includes Australia, Dutch, Netherlands, UK and France. The aim of the study was to assess Tobacco industry investment by the Pension Funds under National Pension Scheme regulated by Ministry of finance, Govt. of India.
METHODS: The List of major Tobacco companies listed on NSE was obtained. Four companies viz. ITC Ltd., VST Ltd., Godfrey Phillips and Golden Tobacco were included and searched across all schemes. All ten Govt. Pension Funds were analyzed across 6 schemes and data (number of Units, amount & percent of portfolio invested) from portfolio reports for the month of Dec 2024 was assessed. Data was entered into digital spreadsheets.
RESULTS: 42 schemes (with investment in ITC Ltd.) across ten pension funds were included in the study. The pension funds invested in only one Tobacco business (ITC ltd). Overall % portfolio invested in ITC Ltd. Ranged from 3.40% to 0.19% across various schemes. Overall, 853.8 million USD was invested by Pension Funds under NPS. LIC Pension fund comprised 25.1% of the total investment in the tobacco business by pension funds followed by SBI (22.5%), UTI (22.1%) and HDFC (20.8%).
CONCLUSIONS: The results of the current study reports that there is significant investment of the Govt. Pension Funds into Tobacco. Therefore, the pension funds should more sensitized about global practices of ESG investments and thus avoid investing in business with negative environment, health and social costs.