Global fund manager Man Group is considering the impacts of divestment from tobacco as part of its broader approach to responsible investing.
Jason Mitchell, sustainability strategist, Man Group,
The fund manager does not have a blanket policy of divestment from tobacco, but the firm is engaging on the issue. Late last year, Jason Mitchell, sustainability strategist, Man Group, talked with Dr Rachel Melsom, director of Tobacco Free Portfolio for a podcast episode.
“When it comes to tobacco, I’ve been very involved with the PRI for a long time on this topic,” Mitchell said. “We’re trying to frame the case for tobacco free portfolios around the regulatory risk from a financial investment risk perspective. In the longer term, it’s around branding and write-down of goodwill. What we’re trying to do is to frame it around what tobacco represents in terms of financial markets.”
Mitchell has chaired the PRI hedge fund advisory committee since 2014, and is joining the PRI Academic Network Advisory Committee.
Tobacco Free Portfolio, which was founded by Peter Mac radiation oncologist Dr Bronwyn King, believes investor engagement with the tobacco industry is futile because of its negative health and social repercussions. In the podcast episode she explains why international policy provides a framework to understand the broader socio-economic implications of tobacco and the momentum behind recent investor announcements to go tobacco-free.
Man Group does maintain some exclusions – controversial arms and munitions.
“We are trying to frame that argument,” Mitchell said. “That’s the most difficult, and the one that we at Man Group struggle with as well. … From a Man Group perspective, our red line is around controversial arms and munitions. At the group level, we have a 5% threshold. However within Man GLG, within European-wide UCITS products, it’s a zero perfect threshold, so it’s genuinely a no-go area, for pooled as well as individual mandates.”
For tobacco, the company is led by investor mandates, Mitchell told The Sustainability Report.
“Our current thinking is that we leave it up to our clients to let us know on individual mandates,” Mitchell said. “However we are working on trying to create products that have a “universal” overlay, where there’s an overlay of universal exclusions – one would be controversial munitions, or tobacco, or low carbon, or nuclear munitions.”
When considering tobacco divestment, investors often look at reputational risk of being invested in tobacco, Mitchell said.
“It’s about the asset owner getting more comfortable sizing up what the performance drag would be,” he said. “If it costs them a couple basis points, I think they’re comfortable taking that trade-off. We are getting a lot of questions about it. We do run certain exclusionary screens on our systematic side, and we do have a lot of assets under management that are non-pooled which is norms-based, and that includes tobacco exclusions.”
The process that Man Group has undertaken speaks to the extent that alternative assert managers, such as hedge funds, have taken up the mantle of responsible investment.
“It’s incredibly interesting to see that within our firm, where around half the assets are in alternative strategies, we are spending so much time thinking about products and the right structures, which have traditionally been the domain of traditional asset managers,” he said. “We are having the conversations with clients and running education programs with managers, trying to refine the policy framework, and just thoughtfully thinking about these issues.”
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