Dear Usman,
I had a quick look at the research paper; and I must add that where I come from neither tobacco, alcohol or gambling is a sin. In fact the gaming stock Paddy Power has been the best performing stock in the ISEQ this year and everybody is scrambling trying to get in on the action.
http://www.bloomberg.com/quote/PWL:ID
Research papers are largely open to subjective reasoning and from my quick review of the paper that you refer to there is a lack of charts which are more exact in their interpretation.
The point that I am trying to make is that it is arbitrary to consider Tobacco stocks unethical and the reasoning for the investment strategy quoted in the above article is very subjective opinion and personal opinion of Dr King who is a medical person and does not have expertise in investing or trading I understand. For a pension portfolio it is a very risky strategy if as a result of tobacco free investing you are excluding consumer staples which are low risk, cyclical and price inelastic in nature.
Personally I have been to Australia in recent years and their anti tobacco and alcohol policies are ridiculous, for example if there is a roof on an out door building but no walls you can't smoke underneath you must go out in the sun (which could cause skin cancer) or you can't smoke within 500 meters of a public building. However there is terrible violence in Australia and violent crime is a serious social problem.
Ethics can be argued in many different ways and are largely subjective in nature. Stock price charts do not lie and tobacco stock are good investments for pension funds and they have been for many many years excluding tobacco funds on the basis that tobacco is unhealthy is unethical from the standpoint of an investment professional for the simple reason that they are not experts in health and it is not their mandate to be experts in health either.
Finally in the article the comment about:
The intent is to signal disapproval of the industry by de-normalizing investment in tobacco.
The role of an investment manager or pension fund manager is never to "signal disapproval" it is a completely ridiculous statement, the role of an investment manger is to get return on investment and that is it.
I look forward to your informed response,
Thank you
Mary