NO SMOKING

CPPIB finally stubs out its shares in tobacco giant Altria.

Canada Pension Plan Investments has sold all of its shares in tobacco giant Altria Group, according to U.S. securities filings.

The divestment follows longstanding pressure on investors to offload tobacco holdings, and concerns over Altria's stake in controversial e-cigarette firm Juul.

The investment arm of Canada's largest pension fund was most heavily invested in Altria in 2017, with 4.8 million shares worth about US$343 million, records from the U.S. SEC show. Its recent divestment saw the fund shed around 3.2 million shares worth US$159.5 million.

Altria has had a tumultuous few years. In December 2018, the Richmond, Va.based firm bought a 35-percent stake in e-cigarette startup Juul for US$12.8 billion, the largest-ever investment in a U.S. venture-backed company. Shortly thereafter, Juul found itself at the centre of a health crisis in which e-cigarette users were developing an acute lung disease, of which at least 68 people have died in the U.S., linked to vaping products sold on the black market. Less than a year after investing in Juul, Altria wrote down its stake by US$4.5 billion; the investment is now worth less than a third of its original value.

Long before Juul, CPP Investments had faced pressure from health professionals to dump its tobacco shares. In 2004, physicians asked the federal minister of health at the time to intervene in its Altria and other tobacco holdings, after the fund voted against shareholder proposals that would have required Altria to place health warnings on its cigarette packages globally. The Canadian Medical Association also urged the fund to divest the following year.

In its 2019 sustainable-investing report, the fund said that since 2004, it has voted for “more than 50 shareholder proposals at tobacco companies requesting improved disclosure and standards on a range of ESG factors, including health impacts and human rights-related matters.”

CPP Investments declined to respond to The Logic's questions about the sale of its Altria shares.

Moody's Investors Services rates the tobacco industry as having high social credit risk. Sustainalytics, a firm that evaluates companies as investments based on environmental, social and corporate governance (ESG) factors, deems Altria a “medium” overall investment risk with “severe” risk related to the environmental and social impact of its products and services.

The company has seen its share price decline steadily over the past four years, falling from a five-year high of US$75.44 on May 1, 2017 to US$41.09 per share on January 13. CPPIB did not say whether its divestment was motivated by the drop in share price, or social or reputational risk factors.