Big tobacco flirting with ESG suitors

Philip Morris believes vaping will bring it within the remit of ethical investment funds

Jacek Olczak, the chief executive of Big Tobacco group Philip Morris, believes his company is on the path to becoming an ESG stock.

He argues that the group’s move away from cigarettes to what are considered “less harmful” vapour-based nicotine alternatives positions it as a candidate for consideration when it comes to assessing the group’s environmental, social and governance (ESG) impact.

Cantillon is not certain whether that says more about the somewhat flexible approach of the ESG investment sector or the tobacco giant’s view on vaping. Either is somewhat disconcerting.

First up, cigarettes – the leading cause of preventable death worldwide – are still big business for Philip Morris. It sold 621 billion of them worldwide last year, according to the Financial Times, which noted that the company had benefited from sales growth in less regulated markets such as Indonesia, Turkey and Egypt.


And, then, there are the growing questions surrounding the health claims and harms of vaping.

Ironically, Mr Olczak’s comments in an interview with the Financial Times came a day after it was reported here that Minister for Health, Stephen Donnelly, was proposing a total ban on the sale of vaping products to people under the age of 18 by this summer.

Surveys in recent years show that 9 per cent of 12 to 17-year-olds in Ireland and 15.5 per cent of those aged 15 and 16 had used e-cigarettes in the previous month.

And, vape maker Juul Labs, owned by Philip Morris’s peer, Altria, has recently settled action in multiple US states over aggressively marketing its vape products to children, accepting a €420 million fine.

But, ESG is big business, the fastest-growing segment of the asset management industry. Philip Morris is clearly assiduously courting the sector, letting it be known that some ESG funds have already tentatively re-engaged with the company even if that was more with one eye on potential investment in an as yet uncertain future.

Even with ESG funds’ sometimes hazy fix on, well, ESG, Mr Olczak may have some way to go as he burnishes Philip Morris’s ESG credentials. Tobacco still accounts for about two-thirds of its revenues and hitting its target of lowering that to 50 per cent by 2025 is by no means certain.