SCOTLAND'S public-sector workers are unwittingly pouring hundreds of millions of pounds through their pensions into funding cigarette manufacturers and companies dealing in arms.
More than £220 million is tied up in tobacco firms – including those behind Marlboro, Benson & Hedges and Lucky Strike – despite guidelines that recommend ethical and social factors must be taken into account by councils administering the funds.
The Scottish Government requires the Local Government Pension Scheme (LGPS) to "take ethical and social considerations into account when making investment decisions".
Politicians and anti-smoking campaigners spoke of their shock at the revelations and called for tougher rules after nine out of 11 councils administering the scheme confirmed to The Herald they have funds tied up in the tobacco industry.
The investments appear to fly in the face of schemes run by councils and health boards to promote healthy living and quitting smoking, with smoking responsible for one in four deaths a year – about 13,000. In 2006, Scotland led the way in the UK by banning smoking in public places.
Fund managers have also directed money into the arms trade, with £55m invested in the world's 10 largest arms sellers who trade in high-explosive shells, rocket launchers, armoured tanks and F-16 fighter jets.
Eight of the local authorities administering the scheme admitted to having money invested in leading defence firms such as Lockheed Martin and BAE Systems.
Patrick Harvie, Green MSP for Glasgow, said: "It is absurd for public pension schemes to be invested in activity which is so directly opposed to the public good, here and around the world.
"There are ethical options out there which the public sector – and everyone else for that matter – should be opting for. I'll be pushing for the Procurement Bill to hold public bodies to a higher standard."
Figures obtained under freedom of information legislation show only two councils that administer LGPS, Dumfries and Galloway and Shetland, have no involvement in tobacco or companies selling arms.
The other nine have a total of £122m tied up in British American Tobacco (Bat – Lucky Strike), £43m in Philip Morris International (Marlboro), £40m in Imperial Tobacco Group (West) and £18m in Japan Tobacco International, which jointly owns Benson & Hedges with Bat and Philip Morris. More millions were held in smaller tobacco-related firms.
Sheila Duffy, chief executive of Action on Smoking and Health (Ash) Scotland, said: "It is shocking to find so much public money in Scotland is going to prop up an industry which knows that two-thirds of smokers start before 18 yet still resists attempts by the Government to reduce youth smoking.
"Scotland has a strong record in tackling the menace of tobacco. But it is time public bodies put their money where their mouth is, use their substantial pension funds for the public good and agree to clean their investments of all tobacco links."
Eight of Scotland's 11 council pension fund administrators were also found to have investments in major arms sellers, as defined by the Stockholm International Peace Research Institute.
The independent researcher creates an annual top-100 list of companies with the biggest arms sales, defined as sales of military goods and services to military customers.
Scottish council pension funds had £55m invested in the most recent top-10: Lockheed Martin, BAE Systems, Boeing, Northrop Grumman, General Dynamics, Raython, EADS, Finmeccanica, L-3 Communications and United Technologies.
A further £70m was invested in other companies placed 11th to 20th on the list, but much of this was in businesses where arms sales formed only a small proportion of sales. It is not clear how the companies spent the money.
Strathclyde Pension Fund, the largest of the 11 regional funds with almost 200,000 members and an £11 billion budget, has £44m tied up in big tobacco and £26.6m in major arms sellers.
A spokesman said: "We take our social responsibilities seriously and are signatories to the United Nations' Principles for Responsible Investment. We have appointed independent monitors to ensure those principles are adhered to."
A spokesman for the Convention of Scottish Local Authorities, the umbrella body for the 32 local authorities, said: "All councils have their own investment rules and regulations that take account of appropriate destinations for investment."
He added that all funds adhere to the Financial Reporting Council's UK Stewardship Code.
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