The state-backed master trust National Employment Savings Trust says it will be dropping tobacco from its investments.
In an announcement today, the auto-enrolment scheme provider says the decision is based on the expected future performance of the tobacco industry.
It points out stricter worldwide regulation against tobacco products, increasingly aggressive legal action by governments and falling global smoking rates has led Nest to conclude tobacco is a poor investment for its more than eight million members.
Nest estimates it will take up to two years to go tobacco-free – the scheme’s exposure to tobacco is worth approximately £40m now.
Nest estimates if it did not make this change it would likely have around £120m invested in tobacco by 2022 based on having £20bn assets under management.
Nest also says it already has a tobacco-free policy applied to its ESG Emerging Markets fund and Commodities fund.
This announcement will extend the screening out of tobacco across all of Nest’s Retirement Date funds and other fund choices.
Nest’s chief investment officer Mark Fawcett says: “This announcement won’t come as a surprise to some. We’ve been highlighting our specific concerns around tobacco investments and its performance for a couple of years now.
“Tobacco companies are facing legal challenges across the world from governments taking action against an industry causing serious harm to their citizens.
“The harsher regulatory environment stops tobacco companies from attracting new customers and increasing their market share of existing smokers. In our opinion, tobacco is a struggling industry which is being regulated out of existence.
“We have not taken this decision lightly but we don’t think it makes sense to continue investing in an industry whose business model looks increasingly unsustainable.”