Shareholdings

Assistant Health Minister invests in Big Tobacco

While the Albanese government seeks to toughen tobacco controls, the Assistant Health Minister Ged Kearney is investing in index funds with shareholdings in the tobacco industry. (Update: Kearney divested three days after this story was published.)

By Sean Johnson
24 January 2023


Smoking kills 8 million people a year worldwide and is the leading cause of preventable death and disease in Australia.

In late November 2022 Health Minister Mark Butler announced plans by the Albanese Government to introduce reforms to reduce smoking and vaping.

Under the ‘Reignite The Fight Against Tobacco Addiction’ reforms, the government is proposing more graphic warning labels, printed warnings on individual cigarettes, and banning flavours and methanol in tobacco products. Butler also announced consultations on potential reforms to prevent young people accessing nicotine vaping products.

The same day Butler's junior minister, the Assistant Minister for Health and Aged Care Ged Kearney, took to Facebook to welcome his announcement.


So it’s sort of jarring that around the same time Kearney invested in two exchange-traded funds with shareholdings in three tobacco companies.

On 16 December Kearney updated her statement of interests to declare she and her partner Leigh Hubbard have invested in the iShares S&P 500 ETF, an index fund with holdings in 500 large US companies.

Among the fund’s holdings are Philip Morris International, the company behind Marlboro, and Altria, Philip Morris’s parent company. Collectively, iShares S&P 500 ETF invests $34.4 million in the two companies or 0.71% of the fund’s net assets. (The fund’s largest holding is in Apple, which makes up 6.18% of net assets.) 

Kearney also declared that she and her partner have invested in VanEck MSCI International Quality ETF, which has a $4 million shareholding in Imperial Brands, the maker of John Player Special cigarettes. This represents 0.13% of the fund’s net assets.

Since August 2022 Kearney's partner has invested in Vanguard FTSE Europe Shares ETF, which has three tobacco holdings: British American Tobacco, Scandinavian Tobacco Group, and Imperial Brands. $2.6 million (1.1% of net assets) of the ETF are held in the three companies.

And for the first 2-3 months of being a minister Kearney and her partner invested in two other funds with tobacco interests: Vanguard MSCI Index International Shares ETF ($211 million, or 0.76% of net assets, collectively invested in British American Tobacco, Philip Morris International, Altria, Japan Tobacco, and Imperial Brands); and Vanguard FTSE Emerging Markets Shares ETF, a fund with $1.7 million in holdings in eight tobacco or vaping companies.

The eight holdings include ITC Ltd, India's largest tobacco company; Smoore International Holdings Ltd and RLX Technology Inc, China's two largest vaping manufacturers; PT Hanjaya Mandala Sampoerna Tbk and PT Gudang Garam Tbk, respectively ranked first and second in Indonesia; Eastern Company SAE, Egypt's largest; British American Tobacco Malaysia, which has over 50% local market share; and Philip Morris CR AS, Philip Morris's Czech Republic subsidiary and the country's largest tobacco producer and seller.

But don't all ETFs have tobacco holdings?

Many do and many don't. As is common with Australian retail investors, Kearney and her partner have invested in exchange traded funds, index funds that aim to replicate the returns of various indexes by investing in companies on the indexes. Take the iShares S&P 500 ETF. If the fund hopes to achieve the same investment performance as the S&P 500 it has little choice but to have weighted holdings in index companies Philip Morris and Altria.

But Kearney has a choice. She doesn't need to invest in funds with tobacco shareholdings. She would know from her time as a director of HESTA and CBUS superannuation funds that there are many ETFs with environmental, social, and corporate governance (ESG) investment guidelines that steer clear of the tobacco industry. These include iShares Core MSCI Australia ESG Leaders ETF and VanEck MSCI International Sustainable Equity ETF.

Alternatively, Kearney could increase her investments in her existing ESG funds, BetaShares Ethical Diversified High Growth ETF and Vaneck Vectors Global Clean Energy ETF, though we aren’t authorised by ASIC to give investment advice.

Anyway, it’s not hard. No other minister in the Albanese government invests in funds with holdings in tobacco companies. So it's perplexing a minister with health responsibilities hasn't done the same.

Of course Kearney may not be aware her funds invest in the tobacco industry, though given her super industry background this is fairly unlikely. If she is aware, we are confident the holdings would not influence the nurse’s position on tobacco control in any way.

But it is still totally inappropriate for a minister in the health portfolio to draw a financial benefit, however small, from a product that each year kills over 8 million people worldwide and is the leading cause of preventable death and disease in Australia.

When it comes to conflicts of interest and maintaining public confidence in government decision-making, perceptions matter. Ministers should try to avoid having private interests that could be seen by the public to conflict with their official duties.

The Ministerial Code of Conduct states in section 3.12 that “if a Minister becomes aware that a fund or trust has invested in a company that might give rise to a perception of a conflict of interest, the Minister should inform the Prime Minister immediately and liquidate the investment in the fund or trust if required to do so.”

Open Politics thinks it might be time for Kearney to talk to the Prime Minister.

However she doesn't think so, with her spokesperson telling us that "all shareholdings held by the Assistant Minister comply with the requirements of the Ministerial Code of Conduct."

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Labor backbench and Coalition MPs with tobacco investments . . .

Five other parliamentarians invest in funds with tobacco holdings. As they are not ministers, or members of parliamentary health-related committees, their investments do not present the same issue as Ged Kearney’s, however they face a potential conflict of interest when parliament considers the government's tobacco reforms.

  • Andrew Charlton, the new Labor Member for Parramatta, and his partner invest in Vanguard S&P 500 ETF, which has holdings in Philip Morris International (US$3.6 billion) and Altria (US$1.9 billion).
  • Sam Rae, the new Labor Member for Hawke invests via his SMSF in Betashares FTSE 100 ETF, which has holdings in British American Tobacco and Imperial Brands.
  • Alison Byrnes, the new Labor Member for Cunningham, and her partner invest in Vanguard International Shares Index Fund, which has holdings in Philip Morris International and Altria.
  • Paul Fletcher, Liberal Member for Bradfield and shadow minister, invests in Vanguard International Shares Index Fund via Devizes Investments, a holding company for his personal investments.
  • Andrew McLachlan, Liberal Senator for South Australia, invests in Vanguard International Shares Index Fund.

Each ETF's tobacco shareholdings are subject to change. The figures quoted for iShares S&P 500 ETF are as of 19/01/23, VanEck MSCI International Quality ETF are as of 20/01/23, and those for the Vanguard ETFs are as of 31/12/22 (latest available).