Andrew White & Michael Roddan
AMP Capital will dump almost $600 million worth of investments in big tobacco, cluster munitions and landmines that it says are no longer compatible with its ethical investment framework.
The nation’s second-biggest investor is set to approach external fund managers investing money for its multi-asset clients to have them remove the stocks from their portfolio in a process expected to take 12 months.
AMP Capital chief executive Adam Tindall said the investments included shares and fixed-income securities held in passive international index funds, which typically replicate the benchmark by mimicking index weightings for various stocks.
He said AMP had been advised by managers that removing such investments was achievable.
“There is a broad approach to ESG (environmental, social and governance) engagement that we take with companies that we invest in about how they sustain their business,’’ Mr Tindall said.
“But we felt that with these companies and these industries there was no way that could engage with them.”
AMP’s own fund managers have already ceased investing in such stocks themselves, with tobacco manufacturers delisted from the Australian stockmarket in the late 1990s.
The divestment of $440m worth of tobacco exposures will be the nation’s largest tobacco divestment to date.
While Australia’s single biggest such move, the tobacco divestment only makes up about 0.3 per cent of AMP’s $165.4 billion worth of funds under management.
AMP says it has “a new decision-making framework where, in exceptional circumstances, it may exclude companies or sectors on ethical grounds”.
“Tobacco manufacturers have been excluded under the framework because their products are highly addictive, cannot be consumed safely and impact non users via second-hand smoke,” AMP said in a statement.
“Cluster munitions, landmines, biological and chemical weapons manufacturers are excluded because their products indiscriminately kill through normal use … and their use leaves a legacy of significant and specific danger for civilians.”
But AMP’s new rules, which will also see $130m of investments in manufacturers of cluster munitions divested and also end holdings in biological and chemical weapons, do not go as far as AMP New Zealand’s rules, which ban investment in nuclear industries.
There are no companies with known exposure to chemical or biological weapons in AMP Capital’s portfolios, but they will be excluded in future.
Mr Tindall said that while such investment had contributed to returns in the past, their impact on society meant this would be increasingly less likely in the future. He said there was a strong alignment between ethical investment and investor returns and that AMP Capital could continue to meet client expectations.
“We are not prepared to deliver investment returns to customers at any cost to society,” he said.
The fund notes that no other sectors are currently being considered for exclusion. The divestment will begin once AMP Capital updates the product disclosure statements for the affected funds, which is expected to occur over the course of this year.