I'll shamefully admit that I'm a smoker, and I certainly don't. Tobacco is a dirty business. Tobacco companies sell products that bring their customers no obvious benefit - a mild social fillip isn't really much of a trade-off for hopeless addiction (especially at nearly £8 a packet).
No amount of glossy Corporate & Social Responsibility reports - on prominent display last time I visited BAT's palatial headquarters on the Embankment - will convince me otherwise. Neither will Mr Durante's claim that big tobacco has "pioneered campaigns" about the health dangers of tobacco (I'm sure he pinched that line from the film 'Thank You For Smoking'), when his firm and others are attempting to block Australia's introduction of plain packaging for cigarettes, a worthy effort to reduce participation in a habit that kills one in ten adults. Big tobacco's ugly reputation is thoroughly deserved.
Investors, though, are often prepared to turn a blind eye to these ethical shortcomings, because tobacco stocks are undeniably great investments. Addiction often translates into relative price inelasticity, powerful cash flows, and bumper dividends. And for every country such as Australia trying to regulate smoking out of existence, there is an Indonesia or a Russia, where regulation is more lax and smoking rates remain high.
Unfortunately, these are financial characteristics that mean, like it or not, most pension holders are beneficiaries of smoking. It's also why, despite ethical concerns, we've often recommended investing in tobacco and other vice shares - sometimes you just have to hold your nose to beat the market, especially when tough times call for defensive positions.
That partly explains why investment in ethical funds accounts for such a tiny percentage of the overall investment landscape. Ethical managers are constrained by their investment universe - few large companies can boast genuinely stain-free credentials, and some smaller companies that rightfully consider themselves 'clean' are often overlooked by ethical funds by simple virtue of their size.
Meanwhile, what one person finds ethically acceptable, someone else may not. In fact, many ethical funds at the so-called 'light green' end of the spectrum invest in companies that more principled investors wouldn't think were ethical at all - the FTSE4Good index, a benchmark frequently used by ethical fund managers, contains many oil companies and banks, hardly seen as paragons of corporate virtue.
It's unsurprising, then, that there is wariness towards ethical investing - but the principles behind it should not be dismissed as mere gimmickry, because I'm sure most would rather invest in companies that do good rather than bad. Hopefully, National Ethical Investment Week will spark debate that finally makes the industry less of a grey area and more of a green one.
