Keith Swanick (Fianna Fail)
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I thank the Minister of State for taking this important motion on investments held by the National Treasury Management Agency, NTMA, through the strategic investment fund. This is a health and financial policy issue, because tobacco use is the leading cause of preventable death in Ireland and is an enormous strain on our health system. We always want to see the NTMA generate a significant income for the taxpayer through prudent and strategic investments. The strategic investment fund has a statutory mandate to invest on a commercial basis, and I fully acknowledge the independence of the NTMA in carrying out its important work. The long-term strategic investment of taxpayers' money is something that can and should be done professionally and devoid of political interference.

My Fianna Fáil colleagues, Deputies Sean Fleming and Michael McGrath, have previously raised this broad issue on ethical investment with the Minister of Finance and the CEO of the NTMA, Mr. Conor O'Kelly. We know from the NTMA's most recent annual report that the State held more than €7.2 million in quoted equity and debt instruments for Philip Morris, British American Tobacco and other major tobacco firms. This is incredible and is part of almost €35 million of taxpayers' money invested in the alcohol, tobacco, aerospace and defence industries.

I wish to concentrate on the tobacco companies for health and financial reasons. A detailed study, an assessment of the economic cost of smoking in Ireland, was produced by the Department of Health in 2016. The estimated cost of smoking on the health care system is more than €500 million per year. This is made up of direct costs in three areas. These are hospital-based costs of €211 million, primary care costs amounting to an enormous sum of €256 million, which could solve our primary care crisis at least five times over, and domiciliary costs of €40 million. It is estimated that approximately 6,000 people are killed annually by smoking. This is equivalent to the population of an entire town such as Bandon in County Cork, Westport in County Mayo, Kells in County Meath or Carrick-on-Suir in County Tipperary. The direct cost of €500 million year does not include lost productivity from ill-health and other huge drains on our public services. Department of Health data from three years ago shows an average cost of €5,400 every time a smoker was admitted to hospital with a tobacco-related illness, for example chronic obstructive pulmonary disease, COPD. In 2013, which is the most recent year for which I have statistics, there were 31,000 such admissions at €5,400 per admission. This does not include the primary or GP care costs and associated costs such as medication.

I am aware that investment by the NTMA in specific companies is made through fund managers, lest it be suggested the NTMA actively seeks to invest in such companies. However, it is the case that over the summer, the NTMA CEO told the Committee of Public Accounts that armaments is the NTMA's only restricted investment category. In 2015, information made available by the Minister for Finance outlined that the strategic investment fund has excluded 14 companies from its investments. These companies are not named, but it beggars belief the Irish taxpayer still has €7.2 million in equity and debt instruments in tobacco giants such as Philip Morris and British American Tobacco. In case anyone has forgotten, these are some of the same companies that threatened to sue my Seanad colleague, Senator James Reilly, and his successor as Minister for Health, Deputy Leo Varadkar, for doing their job.

This area is above party or partisan politics. We all need to address it and provide leadership on it. When he was Minister with responsibility for health, Fianna Fáil leader, Deputy Micheál Martin, led the way in pioneering our move in Ireland towards a tobacco free society with the ban on workplace smoking. Other countries followed suit once they saw the success it was having. The area of ethical investment is another area in which we should take the lead because while wholly independent, the strategic investment fund's investment policy is set out by the National Treasury Management Agency Act 2014. According to the Minister for Finance, the strategy is determined, monitored and kept under review in accordance with the Act. This is the basis for my call for a process to be put in place to put investment in tobacco companies on the list of prescribed investments.

I struggle to understand how holding equity and debt instruments in such companies is in keeping with what various Ministers said regarding their intention to establish the Ireland Strategic Investment Fund. Former Minister of State, Deputy Fergus O'Dowd, spoke on Second Stage of the legislation in 2014. He stated, "The intention is that the Ireland Strategic Investment Fund, ISIF, will channel its resources towards productive investment in the Irish economy and leverage its resources with private sector co-investment and target investment in areas of strategic significance to the future of the Irish economy".

Eoghan Murphy (Dublin Bay South, Fine Gael)
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I thank Senator Swanick for raising the matter of the Ireland Strategic Investment Fund, commonly referred to as the ISIF, and certain investments made by that fund. I raised this issue as an area of concern in the previous Dáil.

By way of introduction and context, it is helpful to consider the evolution of the ISIF's investment portfolio. On the 22 December 2014, the National Pensions Reserve Fund, NPRF, transitioned to the ISIF. The ISIF has a statutory double bottom line mandate to invest on a commercial basis to support economic activity and employment creation in Ireland. Certain shareholdings which were inherited from the NPRF and which are in companies based outside Ireland are held in the ISIF's global portfolio. The global portfolio has undergone significant restructuring since 2014 and is being sold, over time, to fund Irish investment commitments as they arise. This approach provides capital for investment in Ireland.

The ISIF commits to reviewing all of its investments for exposures to sectors and-or companies with potentially controversial business exposures and associated reputational risks, to ensure they are addressed and mitigated as appropriate. I can inform the Senator that the ISIF currently has equity holdings in four companies operating in the brewers, distillers and vintners category. These investments have a value of €3 million. The ISIF also has equity holdings in three tobacco companies. These investments have a value of €1.6 million. As of 30 August 2016, these alcohol and tobacco investments in total represent 0.06% of the lSlF's total assets. These investments are within the ISIF's global portfolio. They are legacy investments inherited from its predecessor, the NPRF. These investments do not form part of the ISIF's new mandate, which was formed at the time of its establishment in December 2014.

Such investments should be considered in the context of the broader portfolio of the fund and the fund's commitment to responsible investment. The ISIF's mandate is aligned with sustainability principles, in terms of investment opportunities and risk management. The fund recently published its sustainability and responsible investment policy, which is available on its website. The fund operates to high international standards and invests in line with the UN-sponsored principles for responsible investment, which focus on the management of environmental, social and governance factors to improve sustainability of investment returns, and the Santiago principles, which are the globally accepted best practice principles for sovereign investment funds such as the ISIF. The fund implements its sustainability and responsible investment policy in a number of ways, but primarily by focusing on the integration of environmental, social and governance factors into its investment decision making pre-investment; and by being an engaged and active owner of its investments to positively influence companies.

Exclusion has not been part of the fund's responsible investment strategy, with the only exclusions from the fund being mandated by legislation. To date, the Cluster Munitions And Anti-Personnel Mines Act 2008 is the only relevant legislation, and the ISIF operates a prohibited securities list of 14 companies on this basis. There is currently no basis for tobacco or alcohol exclusions in legislation.The ISIF has committed to a review of its exclusionary policy. ISIF senior management and the NTMA board investment committee have agreed to review the current prohibited securities policy to examine the potential of adding to the list of excluded investment categories. A review of the ISIF exclusionary policy is under way and is expected to be completed by the end of the first quarter of 2017. The review of the ISIF exclusionary policy is under way separate to the ISIF investment strategy review. Given the new and unique mandate of ISIF as a sovereign development fund, and because of the uncertainty regarding the investment opportunities in Ireland, it was agreed at the time of the establishment of ISIF in December 2014 that a formal review of the ISIF investment strategy would take place after 18 months. This allows for a sufficient period of time having elapsed before considering the operations and impact of the fund.

I am informed by ISIF that preparatory work in respect of this formal review of its investment strategy has commenced and the review is due to be completed by the end of 2016. The review will include an appraisal of the success of ISIF's mandate to date. The NTMA (Amendment) Act 2014 provides that ownership of the fund vests with the Minister for Finance. It also provides that the fund shall, in reviewing its investment strategy, consult the Minister for Finance and the Minister for Public Expenditure and Reform. The review of the ISIF will be conducted in accordance with these provisions. In addition, the legislation provides that the Minister for Finance may consult with other Government Ministers, as appropriate.

Keith Swanick (Fianna Fail)
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I will be brief. I would like to remind the House of some keys facts from the World Health Organization. Tobacco kills up to half of its users and approximately 6 million people each year globally. Why is the taxpayer continuing to invest in this sector? I refer the Minister of State, Deputy Murphy, to a previous statement by the former Minister of State, Deputy Fergus O'Dowd, during the passage of the aforementioned legislation to the effect that the NTMA must consult with the Minister for Finance and the Minister for Public Expenditure and Reform, who may consult other Ministers and must have regard to their views. Has this been done and, if not, why not?

The issue of investment in fossil fuel extraction has been raised by other Members of the Oireachtas. I appreciate the Minister of State, Deputy Murphy, taking the time to deal with this important issue. However, I intend to continue to pursue this issue and will be working with others to bring a motion or resolution before the Seanad seeking that the Minister for Finance and the Minister for Public Expenditure and Reform do exactly as provided for under the legislation and thereby bring to an end the hypocrisy whereby the NTMA, through ISIF, holds financial positions in companies that are suing the State and the Minister for Health in the knowledge that one out of two users will die from use of these products. We need to seek a timely unwinding of such investments held by the State.

Eoghan Murphy (Dublin Bay South, Fine Gael)
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The Senator's intentions in this area are sound. I note that these are legacy holdings and that there is currently a review under way, both in terms of the fund's investment policy and its exclusion policy. Now is the time to engage on this front. In regard to the work which the Senator intends to pursue, he might want to look to Norway and its ethical policy for its pension fund, which is well regarded around the world in terms of how it approaches its investments and is also very successful.

In the last Dáil, I published an ethical investments Bill but it did not make it to Second Stage, unfortunately. That Bill also addressed the issue of putting in place legislation dealing with cluster munitions as part of our obligations under the cluster munitions treaty not to invest in companies that manufacture those types of weapons. It was also an attempt to build a framework through which we could include other types of ethical investments and to address the need for certain divestments on an ethical basis. Issues being considered in the context of the review include what exclusions should be contained in the policy of the new fund as it moves away from legacy investments into new investments as per legislation. I encourage the Senator to engage with that review, which is expected to be completed by the end of the first quarter in 2017.