Business, global leaders launch tobacco-free finance pledge

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Leaders in the world of finance joined with governments and health organizations on Wednesday to launch The Tobacco-Free Finance Pledge at the United Nations. The goal is to reduce the current annual death toll of 7 million people a year who die from tobacco-related illnesses.

The pledge encourages signatories to consider the adoption of tobacco-free finance policies across lending, insurance and investment sectors that are in line with aims of the United Nations and the World Health Organization.

The initiative was launched at the U.N. headquarters in Manhattan during General Assembly week and is being co-sponsored by the French and Australian governments.
The pledge was initiated by not-for-profit Tobacco Free Portfolios, with CEO Dr. Bronwyn King and her team working in collaboration with various U.N. agencies and the firms of AXA, BNP Paribas, AMP Capital and Natixis.

“We're committed to financing economic development that has a positive impact on society. This includes action to ensure healthy lives for present and future generations,” said Jean-Laurent Bonnafé, director and CEO of BNP Paribas. “In this respect, we consider that the Tobacco-Free Finance Pledge is a milestone initiative. Having ceased our financing and investment activities related to tobacco companies, we are proud to be one of its founding signatories."

The pledge was launched with over 120 founding signatories and supporters which include financial institutions from around the world representing trillions of dollars of capital, including assets under management of over $6.4 trillion, corporate loan books of over $1.8 trillion and insurance premiums of over $179 billion.

Speaking before the U.N. on Wednesday, California State Treasurer John Chiang talked about the importance of governments and financial institutions excluding tobacco holdings. He also explained the process that CalPERS and CalSTRS — the nation’s two largest pension funds — undertook to achieve tobacco-free funds.

In the U.S., many states have issues municipal bonds backed by payouts from the big tobacco companies under a master settlement agreement. As of 2015, the senior lien tobacco bonds total about $32 billion in par amount outstanding, with $19 billion rated below investment grade.

“Tobacco bonds are a predominately high-yield U.S. municipal asset class,” Invesco analysts Steve Hong, Allen Davis and Stephanie Larosiliere wote in a report released earlier this year. “In 2017, high-yield tobacco bonds returned 22%, outpacing all other revenue sectors of the U.S. municipal market.”

The tobacco-free pledge commits the signatories to the following actions:

  • Collaborate to raise awareness of the issue of lending to, investing in, and insuring tobacco companies;
  • Encourage the adoption of tobacco-free finance policies across lending, investment and insurance;
  • Encourage the alignment of lending, investment and insurance policies with the aims of the U.N.s’ Sustainable Development Goals and the World Health Organization Framework Convention on Tobacco Control;
  • Consider forming or supporting partnerships within or across sectors to promote tobacco control initiatives;
  • Help guide a widespread transition towards tobacco-free finance by supporting activities that build knowledge and understanding of tobacco-free finance;
  • Encourage more organizations to become signatories to or supporters of the Tobacco-Free Finance Pledge; and
  • Gather again in two years’ time with an expanded global network committed to the Tobacco-Free Finance Pledge.

BNP said that the global financial community is recognizing the increasing commercial, regulatory and social headwinds facing the tobacco industry and the need to “denormalize” tobacco by ending all business and financial ties with this industry.

“The finance sector has long been a missing piece in tobacco control, treating tobacco as a normal participant in the global economy and financing the industry through lending, insurance and investment,” BNP said in a press release. “This public declaration of support for tobacco-free finance, and the call to others to follow suit is a decisive step, highlighted by increasing momentum and change.”

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Primary bond market Smoking cessation