Tobacco, alcohol and weaponry - here's where some of the state's investment has been flowing

ALMOST €35 MILLION in taxpayers’ funds is invested in the alcohol, tobacco, aerospace and defence industries through the state’s sovereign-wealth pools.

But new figures for the National Treasury Management Agency (NTMA), which overseas the nation’s investments, show the share of funds put into the sectors has been falling – declining from €45 million at the end of 2014.

The organisation, which manages the Irish Strategic Investment Fund (ISIF), had a total exposure to the industries of €34.5 million as of June this year, according to new figures provided to Fora.

The bulk of the NTMA’s equity investments in the alcohol, tobacco and defence industries relate to the ISIF, which was set up with the remainder of the National Pension Reserve Fund after its predecessor was raided to keep the banks afloat during the financial crisis.

The ISIF has a mandate to make investments on a commercial basis, with one of its stated aims to “support economic activity and employment in Ireland”.

Its total portfolio was worth €21.3 billion at the end of June, with €355 million committed to support SMEs and another €447 million going towards venture funds.

Tobacco and alcohol

According to the NTMA’s recently published annual report, the state held more than €7.2 million in both quoted equity and debt instruments for Philip Morris, British American Tobacco and other major tobacco firms.

The state also has small equity investments in international companies involved in the development of armaments, such as Canadian group Bombardier, French firms Thales and Boeing, and the US’s Airbus Group and United Technologies.

The NTMA’s investments in the companies are made through fund managers, rather than the organisation actively selecting the firms or industries.

The report said the organisation’s largest single investment last year was in Irish Water, with a €450 million loan facility provided to the semi-state company – €300 million of which was drawn down by the end of 2015.

NTMA CEO Conor O'Kelly and Finance Minister Michael Noonan

Ethical investment

Earlier this year, NTMA chief executive Conor O’Kelly told the Dáil’s Public Accounts Committee that armaments is the organisation’s only restricted investment category.

The ISIF’s ethical investment policy for armaments is mainly influenced by its commitment to the UN Principles for Responsible Investment, but this policy does not stop its funds going into the sector altogether.

Under the UN guidelines, the ISIF is required to carry out investments on an ‘active-ownership basis’, which means it does not have to rule out any companies as long as it works to improve their environmental, social and governance policies.

In response to a parliamentary question last year, however, Finance Minister Michael Noonan revealed that the NTMA has excluded 14 companies from its list of possible investments – although he did not list the banned firms.

These exclusions were made to ensure the state complied with Irish legislation prohibiting the support of companies that developed cluster munitions and anti-personnel mines.

Boeing's F-15 Silent Eagle

Meanwhile in April, the ISIF said it was committed to putting more money into medium-sized Irish companies over the next four years. The fund has made direct investments in mobile analytics firm Swrve and life sciences investment outfit Malin, among others.

ISIF director Eugene O’Callaghan revealed the sovereign wealth fund expected to pledge in excess of €750 million to Irish businesses and funds over the course of 2016. This would bring increase its total commitments to almost €3 billion.