To the COP26 Summit in Glasgow: Moving to “Tobacco-Free Finance” is Good for Public Health and the Environment

Submitted by Patricio V. Marquez on Wed, 11/03/2021 - 12:35 PM

To the COP26 Summit in Glasgow: Moving to “Tobacco-Free Finance” is Good for Public Health and the Environment

3D Save the planet, ecology eco environmental protection, climate changes, COP26, planet with 3D Text illustration isolated on green background.

Climate change is one of the greatest risks and development challenges of our time.  Under the UK  Presidency, the 26th UN Climate Change Conference of the Parties (COP26) is being held in Glasgow on 31 October – 12 November 2021, bringing together world leaders.  By completing unresolved issues and reinforcing commitment to implementing the Paris Agreement (a legally binding international treaty that entered into force in 2016), countries will demonstrate that they can work collaboratively to address the urgent and linked challenges of public health, climate change, and biodiversity.  This is vital to spearhead a “green recovery” from the COVID-19 pandemic and safeguard the environment for future generations. 

Transitioning away from coal, the world's most dominant and carbon-intensive source of energy, is a critical step to fight climate change, since the energy sector produces about three-quarters of all greenhouse gas emissions, largely because of coal.  There are other transitions across sectors that can do their part to combat climate change following a whole-of-society approach that involves a broad range of stakeholders—governments, private sector, workers and communities, academia, civil society.  

One of those transitions, and one that could generate a “win-win” for the environment and public health, is excluding tobacco from investments by governments and financial institutions such as asset management companies, pension funds, and university financial endowments. This transition is not only complementary to achieving net zero, but would reinforce the impact of the Framework Convention of Tobacco Control (FCTC) supply and demand provisions to reduce tobacco use globally, save millions of lives each decade, reduce poverty, and boost development investment needed in a post-pandemic world.   

The Impact of Tobacco Production and Use on the Environment

Although more than 1 billion people around the world still smoke, few people today doubt that tobacco use is bad.  But many, including seasoned policy makers, do not realize just how bad it is. Bad for people, bad for the environment, bad for economies, and bad for poverty reduction.  Tobacco companies make products that kill more than eight million people each year due to tobacco-attributable diseases; smoking is also a leading cause of fires and death from fires globally. While nicotine alternatives such as e-cigarettes are often marketed as safer than traditional combustion products like cigarettes, results from a study of some popular brands by researchers at Johns Hopkins University show that vaping exposes users to around 2,000 chemicals, including potentially harmful industrial compounds. According to recent estimates, the total economic cost of smoking (from health expenditures and productivity losses together) totaled US$1436 billion in 2012, equivalent in magnitude to 1.8 percent of the world's annual gross domestic product (GDP). Almost 40 percent of this cost occurred in developing countries, highlighting the substantial burden these countries suffer.

While the health effects of cigarette smoking are well documented, scant attention has been paid to the impact of tobacco production and use on the environment in terms of deforestation and soil degradation, climate change, the waste it produces, and pollution of waterways.  A summary of available information from different sources is presented below to illustrate the overall impact of tobacco on the environment : 

  • Tobacco cultivation devastates the environment. As documented in a study,  major tobacco farming practice in low- and middle-income countries (LMICs) that contributes to environmental degradation is deforestation to clear land for tobacco growing and for fuel wood used in the flue curing of tobacco.  Often, farmers clear forests by burning them.  As demand for tobacco leaf increased dramatically over the 20th Century, so was the amount of land dedicated to tobacco production. It is estimated that tobacco cultivation is responsible for 5 percent of the world's deforestation. Frequently, this land is agriculturally marginal and after only a few seasons, it is abandoned, contributing in many cases to desertification--the process by which fertile land becomes desert, typically as a result of drought, deforestation, or inappropriate agriculture. Not only does burning generate vast amounts of land, water, and air pollutants, but much of this land is cleared from carbon dioxide-absorbing forests. As a result, tobacco cultivation is exacerbating greenhouse gas levels.
  • The use of agrochemicals is another practice in tobacco cultivation that disrupts ecosystems. Tobacco is often grown without rotation with other crops (i.e., as a monocrop), leaving the tobacco plants and soil vulnerable to a variety of pests and diseases. The systematic use of chemicals, such as fertilizers or pesticides, in tobacco plantations, and their discharge into the groundwater disrupts and endangers ecosystems, especially aquatic ones. Tobacco growing not only degrades the quality of water but also contributes to the waste of this limited resource that is vital to sustain life. 
  • Manufacturing and post-consumption tobacco product disposal generate vast amounts of waste. Estimates suggest that tobacco companies produce more than 2.5 million tons of manufacturing waste, much of which contains nicotine and other dangerous chemicals. Millions of tons of packaging waste, much of it plastic, ends up as litter or helps to overwhelm landfills around the world. Because of the massive consumption of tobacco products, nicotine and tobacco byproducts such as cotinine end up in many solid-waste landfills or dumps. Cigarette butts, which are too often thrown on the ground, are also a major source of pollution. They alone represent 40 percent of the waste retrieved during waste collection campaigns. The main problem is that cigarette butts take years to decompose, and on top of that, they usually end up in our sewers, rivers, or oceans, where they are a major source of water degradation. Cigarette butts can also be the cause of forest fires which each year reduce to ash 300 to 400 million hectares of vegetation around the world.  Similarly, the disposal of parts in e-cigarettes such as cartridges that are specifically not reusable or recyclable, are now adding to the waste generated after the consumption of tobacco products. 
  • Tobacco cultivation and manufacturing, as well as tobacco smoke, contribute many toxic substances that are released directly into the environment. Estimates done by researchers at the Imperial College London, indicate that the cultivation of 32.4 metric tons (MT, equal to 1000 kilograms) of green tobacco used for the production of 6.48 MT of dry tobacco in the six trillion cigarettes manufactured worldwide in 2014, contributed almost 84 MT of carbon dioxide (CO2), one of the greenhouse gases responsible for global warming (approximately 0.2 percent of the global total of CO2 emissions). It also contributed 490 000 MT of 1,4-dichlorobenzene (an organic compound), and over 22 billion cubic meters and 21 MT of oil, to water and fossil fuel depletion, respectively.  Other estimates reported in a World Health Organization report show that global tobacco smoke contribute to thousands of metric tons of known human carcinogens, other toxicants, and greenhouse gases. Toxic emissions include 3000–6000 metric tons of formaldehyde; 12 000–47 000 metric tons of nicotine; and the three major greenhouse gases found in tobacco smoke – carbon dioxide, methane, and nitrous oxides.

What Can Be Done?

There is no time to lose.  As highlighted by Zac Goldsmith, the UK’s international environment minister, in a recent article at The Guardian, “Globally, nature-based solutions such as forests, mangroves and peatlands could provide about a third of the most effective and cost-effective solutions to the climate crisis that we need now – as well as helping communities adapt to the changes that are now inevitable. But currently, they attract just 3% of total global climate finance. That makes no sense at all. If we were to lose any of the world’s great forests, we would have zero chance of stabilizing the world’s climate, of staying within 1.5C of warming, of reversing the catastrophic loss of wildlife”. 

As clearly outlined in the Paris Agreement, stepped up efforts globally are therefore required to adapt to the impacts of climate change, prevent further damage to the environment, and make financial flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development

In line with FCTC and COP26 commitments, governments and private investors have an opportunity at the COP26 summit in Glasgow to agree to tobacco-free finance as a concrete, measurable contribution to reach Net Zero.  More specifically, moving to tobacco-free finance will contribute to implementing the commitment of a coalition of 100 countries forged together by the UK to ‘halt and reverse global deforestation by 2030.  It will also help tobacco farmers to switch to the cultivation of environmentally-friendly alternative crops and/or develop other nonagricultural economic enterprises, that will boost household incomes, by facilitating access to credit, developing supply and value chains of other locally-grown crops (e.g., fruits), and support the extension services and agricultural education for non-tobacco crops.

By contributing to change human behaviors and environmental perturbations, such as land clearing for tobacco farming, tobacco-free finance will also help rebalance the environment-animal-public health interface to prevent epidemics or pandemics of ‘newly emerging’ and ‘re-emerging’ infectious diseases of animal origin that can, as we have seen with COVID-19 and before with Ebola, Zika, MERS, and SARS, spread with impunity across national boundaries, causing economic and social havoc in their wake. Indeed, factors as diverse as microbial genetic mutation and viral genetic recombination or reassortment, changes in populations of reservoir hosts or intermediate insect vectors, microbial switching from animal to human hosts, human behavioral changes (notably human movement and urbanization), and environmental factors, contribute to the periodic emergence of new and old infectious diseases, that greatly magnify the global burden of infections. 

As the saying goes, a crisis poses challenges but also offers opportunities to learn and evolve.  As observed by Dr. Bronwyn King, who leads the Tobacco Free Portfolios initiative, on a webinar ahead of the COP26: Many people are finding it really helpful to look at tobacco through the lens of net zero and how their financial institution can work its way to net zero….while net zero will take a very long time for organizations to get their heads around - it will take a lot of resources and ongoing refinement over a long time, one really great thing about tobacco-free is that it is one decision that you can make today. It is relatively straight forward and it’s a really meaningful commitment and really meaningful symbol of a financial institution’s commitment to net zero.”   

The good news is that different institutions, both public and private, across the world are already doing the walk and not only the talk.  For example, the Tobacco-Free Finance Pledge, an initiative founded by Tobacco Free Portfolios and developed in collaboration with the United Nations Environment Program (UNEP) Finance Initiative, Principles for Sustainable Insurance (PSI), Principles for Responsible Investment (PRI), AXA, BNP PARIBAS, Natixis Beyond Banking,  and AMP Capital, which highlights the leadership of financial institutions that have implemented tobacco-free finance policies and encourages others to follow suit, currently has 167 signatories headquartered in 21 countries and 46 supporters representing US$11 trillion in Assets Under Management, US$2.7 trillion in Corporate Loan Books, and US$268.5 billion in Gross Premiums.   

There are other institutions that are doing their part in this area globally. For example,  California Public Employees’ Retirement System (CalPERS), the largest US pension plan by assets, was one of the first institutional investors in the world to remove tobacco companies from its holdings 20 years ago. Since December 2020, the portfolio of Caisse de Dépôt et Placement du Québec (CDPQ), Canada’s second largest pension plan that recently signed the Tobacco-Free Finance Pledge, has been free of any investment in tobacco – including producers and manufacturers of cigarettes and tobacco products, as well as those whose products are related to vaping.  Since the late 1990s, the World Bank Group has had an unambiguous corporate policy on tobacco, which is codified in its Operational Directive 4.76, that mandates that the institution does not: (a) lend directly to tobacco production, processing, or marketing; (b) provide grants for investment in these activities; or (c) guarantee investments, loans, or credits for these industries. In any World Bank Group-funded project, unmanufactured and manufactured tobacco, tobacco processing machinery and equipment, and related services are on the negative list of imports, that is, goods and services for which World Bank Group funding cannot be used. Going beyond the supply-side measures, the World Bank Group actively supports use of comprehensive programs to reduce tobacco use.

Takeaway:  The Financial Sector Matter for Climate Change

Pachamama  or Mother Earth, revered by the indigenous people of the Andes to this day, is considered to be a benevolent deity that presides over planting and harvesting and who, through her creative power, sustains life.  This belief system also holds that when people damage Mother Earth, problems arise because her life cycles are affected. 

Rapid climate change—caused by the injurious impact of man-made actions on the environment—has become a priority issue in the 21st century since it has the potential to negatively impact the economic and social development of countries across the world, in far reaching ways than the ongoing COVID-19 pandemic. While solid scientific evidence on climate change has led to heightened awareness about this challenge in recent years, policy action at the international level has not lived up to expectations.  The COP26 Summit, therefore, offers countries, private sector institutions, nongovernmental organizations, and other stakeholders, the opportunity to recommit and pledge to implement net zero targets per agreed timetables.

As we move forward, paraphrasing an African proverb, we should remember that if we walk alone, we could go fast, but if we walk together as a broad collective we will go far.  Leveraging the power of international finance markets by promoting shareholder activism to pursue “tobacco-free investments”, complementing the renewed commitments made by governments at Glasgow, represents a concrete action step to help make progress towards limiting global warming to 1.5˚C, which requires carbon dioxide (CO2) and other greenhouse gas (GHG) emissions to rapidly decrease to net zero around 2050 and 2070, respectively.  

This is doable, as the above proposed action step could build upon new commitments and emerging practices in the financial sector to addressing climate change.  Indeed, as reported by the Wall Street Journal, banks and investors with US$130 trillion in assets are not only changing corporate thinking but have already pledged at the COP26 Summit to shift their funding to help reduce carbon emissions, while using their lending power to persuade clients to get aboard too.


Credits for Images:
Image 1: Credit: urbanbuzz; Stock photo ID:1350376645; Upload date: October 31, 2021; Categories: Stock Photos | 2021 United Nations Climate Change Conference
Image 2: Picture taken by author at the Charles Darwin Foundation, Galapagos, Ecuador, November 2019. 

Patricio V Marquez, who is currently serving as a Pledge Champion at the Tobacco Free Portfolios Foundation, has been a longtime champion of tobacco-control efforts both at the World Bank Group and globally.


Picture taken by author at the Charles Darwin Foundation, Galapagos, Ecuador, November 2019.