The Croydon section of the local government pension scheme will no longer invest in tobacco, nuclear power or arms.
The fund, which at its March 2013 valuation had assets worth £705m and a deficit of £359m, has switched its equity allocation to an ethical investment fund which screens out shares associated with tobacco, nuclear power and weapons.
This comes after the LGPS shadow scheme advisory board said, based on legal advice, that LGPS funds could drop shares in controversial assets provided they could demonstrate that they had invested in assets offering a similar return.
Cllr Simon Hall (Lab), cabinet member for finance and treasury, said: “The council will be getting a better investment deal as ethical funds are performing favourably against other schemes.
“Tobacco is not the low-risk, high-profit investment it once was. This really is in the best interests of the scheme’s beneficiaries and residents, both ethically and financially.”
Cllr John Wentworth (Lab), chair of Croydon’s pensions committee, said tobacco investment contravened the councils’ public health responsibilities, as Newcastle City Council has argued.
Mr Wentworth said: “Having a pension fund that invests in tobacco was very much at odds with our responsibility to protect and improve public health in this borough, and there were clearly a number of concerns about the ethics of doing that.
“Ensuring that the council is a socially responsible investor was a key manifesto pledge for the administration.”