On its current trajectory, in this century tobacco will claim 200 million Chinese lives.
That’s double the death toll of both World War I and World War II combined.
I discovered this fact a few weeks ago whilst doing some research. I came across a report that disturbed me. I’ve been thinking about it ever since.
Welcome to our latest issue of issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring Tiger Global's losses total 44% in 2022, Allianz Global's $5.8bn SEC settlement, and commodity funds draw in cash. Q1 2022 hedge fund Read More
It was a report by the World Health Organisation (WHO) titled “The Bill China Cannot Afford – The Health, Economic and Social Costs of China’s Tobacco Epidemic”.
When it comes to China, we’re used to big numbers. And I don’t consider myself easily shocked. But the numbers contained in this report are simply astonishing.
Death by numbers
- More than 1 million people die in China every year as a result of tobacco use – around 3,000 people every day.
- This will grow to 2 million annually by 2030, and 3 million annually by 2050 without action to drastically reduce smoking rates.
- China is the world’s largest tobacco producer, consumer, and manufacturer. Around 28 percent of adults (people aged 15 years and older) are current smokers.
- Between 2010 and 2015, the number of smokers in China increased by 15 million to 315 million.
- In 2014, China’s smokers consumed 44 percent of the world’s cigarettes – more than the next 29 cigarette consuming countries combined, including Indonesia, Japan, the Russian Federation and the United States of America.
- The average smoker in China smokes around 22 cigarettes a day – a nearly 50 percent increase since 1980.
- More than half of adult men are current smokers.
- Around one-third of young Chinese men alive today – if not more – will eventually be killed by tobacco use.
- China National Tobacco Corporation (CNTC) is the largest tobacco company in the world and one of the Chinese government’s most profitable state-owned enterprises.
- CNTC’s share of the global tobacco market is bigger than several of the leading multinational tobacco companies – Philip Morris International, British American Tobacco and Imperial Tobacco – put together.
- In 2013, CNTC manufactured about 2.5 trillion cigarettes.
- On its current trajectory, tobacco is on track to claim more than 200 million Chinese lives this century.
Just let some of those numbers sink in for a moment. I had to re-read them a couple of times at first. We’re talking tens, even hundreds of millions of lives ending prematurely and in highly unpleasant ways. It’s devastation.
When it comes to tobacco, there are no redeeming features whatsoever. None. There are no benefits of any kind attributable to an individual who smokes cigarettes.
The reason I bring this up is because one of the recommendations in The Churchouse Letter is a tobacco company. It’s returned over 85 percent. But the reality is, when a tobacco company is doing well, it usually means more people are smoking more cigarettes. And smoking equals death.
You could make similar arguments about everything from guns, to defense, to gambling, to polluting industries… the list is endless.
A big, personal question
Where do you draw the line when it comes to ethical investing?
This is hardly a new moral dilemma. Some of the earliest ethical investing was made in the 18th century by Quakers (a religious group) who forbade its congregation from investing in anything related to the slave trade.
There are Shariah-compliant investments today which adhere to Muslim or Islamic law and have a similar ethical foundation. They prohibit investing in anything related to tobacco, gambling, or alcohol (amongst others).
In reality, this is a completely personal decision that everyone has to make for themselves. And to be honest, it’s not something I really thought long and hard about until I read that WHO report.
High ethics doesn’t mean low returns
Take a look at the chart below which shows the iShares MSCI KLD 400 Social ETF (DSI). This tracks an index of U.S. companies that have positive environmental, social and governance characteristics (as defined by the index provider).
You won’t find any tobacco companies in here.
But over a decade, it’s slightly outperformed the S&P500.
And as we’re talking about ETFs, there’s no shortage of choice. These aren’t recommendations, but there are plenty of other ETFs with even more specific religious or moral angles out there (should these be values that you want your portfolio to reflect).
Global X S&P 500 Catholic Values ETF (CATH), which provides exposure to the companies within the S&P 500 whose business practices adhere to the Socially Responsible Investment Guidelines as outlined by the United States Conference of Catholic Bishops (USCCB) and excludes those that do not.
SPDR SSGA Gender Diversity Index ETF (SHE), for U.S. large capitalisation companies that are “gender diverse,” which are defined as companies that exhibit gender diversity in their senior leadership positions.
Barclays Return on Disability ETN (RODI), which looks at a company’s publicly observable activities relating to people with disabilities across three key areas: talent, customer and productivity.
It’s not our place to tell our subscribers what we think they should and shouldn’t invest in when it comes to ethics. Our job at The Churchouse Letter is simply to give you our best ideas and let you decide on the rest.