ESG goes up in smoke at L&G over Vectura bid

LOOK up ESG — the buzzword du jour for ethical investing — on Legal & General Investment Management’s (LGIM) website and you’ll find this bold statement: “Our very purpose at LGIM is to create a better future through responsible investing.”

You wouldn’t know it from how it has handled the Vectura deal. LGIM bowed out with a whimper last night, announcing in a mealy-mouthed statement that it was agreeing to sell its 3.7% stake in the inhaler maker to Philip Morris International (PMI), the manufacturer of Marlboro cigarettes.

It’s a deal that lets PMI profit twice from smoking, as campaign group STOP (Stopping Tobacco Organizations and Products) points out: once from the sale of cigarettes and then again from the treatment of problems caused by smoking.

LGIM spent “considerable time reviewing the competing ESG factors and financials” of the “highly sensitive bid,” it says. But ultimately it concluded that accepting the bid was “the optimal result for our clients, investors and the futures of both companies”. So much for a better future.

Contrast LGIM’s response with Axa’s. The French firm also backs Vectura and is selling out, but doesn’t mince its words. Axa “did not support” the takeover and is “uncomfortable with the ethics behind a tobacco group’s purchase of an inhaler manufacturer”. It’s only selling because it’s being forced to.

LGIM should take note. If it wants to be taken seriously as an ethical investor, it shouldn’t pull its punches in crunch moments.