Dundee city financial bosses have been given the go-ahead to stub out controversial investments in cigarette companies.
Councillors called on Tayside Pension Fund managers to ditch the multi-million-pound tobacco stocks but only if an equally lucrative investment can be found.
The fund has more than £28 million invested in some of the world’s biggest cigarette giants stocks that have made the fund £32m over the last five years.
SNP administration leader Ken Guild said: “We agree to advise the Tayside Pension Fund that it wishes the fund to disinvest from tobacco stocks at the earliest possible time given the effect of tobacco on the health of Dundee’s citizens, but recognises that, in order for the fund to do so, suitable alternative investments will require to be identified.”
Mr Guild said fund managers must keep the tobacco investments “under constant review” and should disinvest as soon as equally profitable alternatives are found.
Both Labour leader Kevin Keenan and Conservative member Derek Scott raised concerns that ditching the high-value stock could damage the security of the fund.
Mr Scott said: “I want to be totally sure that no value will be lost as a result of this.”
His concerns were reflected in a report to councillors by the director of corporate services Marjory Stewart.
She said: “Officers are unable to recommend any other investment which would deliver this objective (returns not being diluted) without materially affecting the volatility of risk and return given the existing investment objectives and constraints.
“The employer contribution rate is 18% and is provided for in the revenue budget. The Tayside Pension Fund estimates that a decision to disinvest from tobacco stocks could result in the employer contribution rate being increased to 21.1%.
“This would result in an additional employer contribution cost to the city council of an estimated £3.38 million per annum.”
The motion calling for the disinvestment if a suitable alternative stock can be found was passed unanimously.