AXA stops investing in tobacco shares and bonds

Fund manager and mega-insurer AXA is selling all tobacco-related shares and bonds, despite the industry's history of stellar returns.

The firm said it will sell its tobacco shares, worth around €200 million (£155 million), and will also divest its bond exposure to tobacco companies, worth about €1.6 billion.

Incoming chief executive Thomas Buberl says: "With this divestment from tobacco, we are doing our share to support the efforts of governments around the world.

"This decision has a cost for us, but the case for divestment is clear: the human cost of tobacco is tragic; its economic cost is huge. As a major investor and a leading health insurer, the AXA Group wants to be part of the solution, and our hope is that others in our industry will do the same."

Investing in "sin" stocks, such as tobacco, has been rewarding for investors over the years. A study last year by the London Business School found that the tobacco industry returned more for investors than any other since 1900.

Over the past five years the share prices of Imperial Brands and British American Tobacco  have risen 69% and 51% respectively, ahead of the FTSE All Share index total return of 28%.

The stocks are popular with UK equity income fund managers, as over the years they have proven to be reliable dividend payers. Neil Woodford has been a fan of the sector for some time, with Imperial Brands the top holding in the Woodford Equity Income fund, while British American is the fourth largest bet.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser