August – the Silly Season. Time for a break in Suffolk and two weeks of chill. Sister’s cottage is available in Saxmundham where pace of life is definitely slower plus plenty of family to catch up with. Very slow Internet connection and an overheating laptop become a virtue, resulting in little time on the net and lots of reading done. Halfway through the break, BBC are on the line wanting me on TV on Monday. Not the sort of thing one wants to turn down lightly, but my holiday togs do not include a pinstripe suit. They want to talk to a pension expert about a story of a council that has £7m of its £540 million pension portfolio invested in two tobacco company shares. The same council spent > £3 million last year on an anti-smoking campaign, Council’s Health Credentials Up in Smoke?? says the headline. http://www.wandsworthguardian.co.uk/news/4543507.Council_s_health_credentials_up_in_smoke_/ My limited wardrobe for the TV appearance does not worry them – I have one decent shirt, and they can film me at a local studio and splice that in to the news item for Monday. The weekend gives me time for thought but the issue is quite simple.

Wandsworth Council’s apparent lack of logic here is just the same as that of the national Government – running the NHS while raising £billions from taxes on tobacco products without which, Basic Rate Income Tax would have to be nearer 25% instead of the current 20%.

If you are running a pension fund and you have an investment that is producing good dividends and looks good value, chances are you would want to hang onto it or maybe even buy some more. Didn’t check, but suspect that the two shares involved are are doing their job and if not, would be due for a review or the chop anyway, regardless of ethical issues. You can’t have it both ways. Tobacco stocks, like supermarkets are a classic defensive investment when markets look sticky. We all have to do our shopping and smokers will always need their nicotine fix. Entertainments similarly, as friend Louise, Corporate Entertainments Director for London theatre group http://www.delfontmackintosh.co.uk/Hospitality/ has never been busier.

Changing the investment mandate so armaments, gambling, alcohol and tobacco etc are excluded can be done, but that means a smaller pool of investments to choose from and therefore a slightly higher investment risk. The whole point of investing in a pool of shares or assets rather than the few flavours of the month is to spread the risk.

In the actual programme on Monday which was with Eddie Nestor on BBC Radio London 94.9 FM Eddie asked me if many of my clients cared about this? Have always asked but “Very few” is my answer. There are plenty of IFAs who major in this if it means a lot, as any Google search with “ethical IFA” will reveal or visit www.unbiased.co.uk

First ethical fund in the UK (1984) was the Friends Provident Stewardship Fund shortly followed by NM Schroder Financial Management’s Conscience Fund – NM have long since been subsumed into FP. They were my first company in my financial services career and unit-holder meetings were always lively with an unforgettable one in the Natural History Museum surrounded by skeletons of many huge and frightening dinosaurs. After a review of the year in question, the investment managers invited questions from the floor but in those apartheid days, one issue which always raised temperatures and got things really lively was that of Sainsbury’s selling South African oranges. Sainsbury’s  are a common ethical fund investment are as they have a reputation of being a good employer and give large amounts to charity – positive ethical criteria as opposed to the above-mentioned negative ones. Sainsbury’s view was that the oranges in question were a good quality, reasonably-priced item and their purchases provided employment to people who were (and probably still are) very disadvantaged. If people felt they did not want to buy a South African product, there was a clearly priced alternative next to it.

Other people would get upset when a company with a new gizmo which would save the planet, was not deemed worthy of investment, usual reason being that these were typically start-ups which tend to be weak financially making them a very high risk investment – see http://www.georgeemsden.co.uk/2009/07/im-an-investor-get-me-out-of-here/ where 56 per cent of people lose all their money.

Interestingly, there is a US Government-run Conscience Fund but whereas the UK ones are for people trying to be good, this is for people who have been bad i.e. defrauded or stolen from Uncle Sam and want to make amends http://en.wikipedia.org/wiki/Conscience_Fund – wonder if it would catch on here – for MPs who haven’t come clean about their expenses, perhaps? Contributions to the US Conscience Fund tend to be annonymous and vary hugely, but don’t attract tax relief.

But as yours truly is not quite back in work mode yet, let me share some grisly trivia from one of my holiday reads: Salt A World History by Mark Kurlansky ISBN – 978-0-099-28199-3. In the chapter, Liberté, Egalité, Tax Breaks, is an intriguing item about a use of salt arising from a 1670 revison of the French Criminal Code. Suicide was an offence in France (and until 1961 an offence in the UK as well). But whereas the UK law was designed to prosecute those who did not succeed, the French law was used against those who did and their salted cadavers were brought before a judge and sentenced to be put on public display – YCMIU.