Important information 

As of 9th October, Waystone will be the fund ACD and any reference to Link or LF should be taken as WS or Waystone.

Integrating stewardship and investment - Fixed income

Tobacco sector

The situation

Our analysts flag all tobacco companies with a higher risk profile for social factors in their ESG assessments. This reflects sector-wide issues, including the links to known health impacts, continuing lawsuits, supply chain risks and human rights violations. They also flag the sustainability of the tobacco business model, given those factors and the increasingly onerous regulations that the sector faces.


In accordance with our process, our fund managers must provide a rationale for investing in any company where an ESG issue has been flagged. Given the nature of their business models, our fund managers determined that it would be difficult to provide a robust rationale for investing in tobacco in accordance with our procedures.

The outcome

Our fund managers have determined not to add any additional exposure to the tobacco sector until we have engaged with the companies (in accordance with our ESG engagement procedures) to encourage and monitor progress with regards to the areas of concern. Pre-trade compliance rules linked to our order management system were put in place to support the fund managers’ agreed position to prevent further investment in these holdings. At present, we are not convinced of the long-term merits of investing in this sector. We propose to review our screens over the course of 2022 and this may well be a sector that is impacted, depending on the outcome of our engagements with companies in this sector.