Pension fund to review ethical investments

THE €15 billion National Pension Reserve Fund (NPRF) is to review its policy on ethical investments.

The NPRF, set up to finance public sector pensions from 2025 onwards, has invested in some 1,800 companies worldwide. But it has attracted criticism for investing hundreds of millions of taxpayers’ money in ‘defence’ companies as well as oil and tobacco manufacturers.

The decision to invest in individual companies does not rest with the NPRF or the Government, but with the individual fund managers. Their only mandate is to get the best return on the State’s money.

The NPRF said the issue of ethical investments is to be looked at this year by the Government.

Of the e15.3bn amassed so far in the NPRF, some €12bn is held in equities worldwide.

The State owns shares in tobacco companies Altria (owners of the Marlboro brand) and British American Tobacco (BAT). The BAT shares are currently valued at around €12.5 million, while the NPRF’s 312,407 Altria shares are worth just under €20m.

As Ireland was the first country to introduce a ban on smoking in the workplace there has been criticism for holding shares in cigarette manufacturers.

Though Ireland officially remains a neutral country, the NPRF also has substantial investments in arms companies, including BAE Systems, Boeing, General Dynamics, United Technologies and Thales.

The fund is also a heavy investor in the oil sector with €110m in Exxon Mobile shares and other multi-million holdings in British Petroleum, Shell and Chevron, which some could find environmentally unethical.

Trying to decide what is an ethical investment is a difficult issue. According to one investment manager, it would be nearly impossible to single out one company over another on ethical grounds.

For instance, the NPRF holds shares in casino operators MGM Mirage and Harrah’s Entertainment, fast food operators McDonald’s and Wendy’s, and drinks groups Diageo, Heineken and Anheuser-Busch.

According to one market analyst, people might object on ethical grounds to such investments because casinos are illegal in Ireland and the Government is currently on a drive to tackle obesity and binge drinking.

The most likely option is that some of the money in the fund will be placed in an ethical index of shares, rather than fund managers moving in and out of individual stocks.