Will Fine Wine be considered a Sin stock? – In Conversation with Taotao Xing

Taotao is the Senior Vice President at the Deutsche Börse Group covering institutional clients in the Equity and Index Derivatives space . She is also working towards WSET diploma.

This interview is adapted from diverse conversations with Taotao Xing from April to July 2019, as preparation for her participation in the When Fine Wine is Alcohol panel, held during the 2019 edition of FM4FW in Bordeaux.

Pauline Vicard

We learned last May that Norway’s largest pension fund will pull of their assets from companies that rely on alcohol and gaming, considering both as ‘sin stock’.[1] What are the major implications for the Fine Wine ecosystem?

Taotao Xing

This indeed could deeply impact the Fine Wine ecosystem. The Norwegian pension fund decided to exclude from its portfolio any companies that have more than 5% of its revenue generated from alcohol related business. Five per cent! That is a rather low threshold. 

Some obvious targets are, for example, Diageo, Heineken. But because of the 5% threshold, so will LVMH. When I think about the great LVMH, I don’t think about it as an alcohol company, but a luxury conglomerate.

The term ‘ESG’ (Environmental, Social and Governance) is used by financial professionals, while sustainably is more known by other industries. Investment funds in the rest of the world, notably the ones specialised in ESG, are very prone to follow their Scandinavian lead, as they have been pioneers in driving ESG investment in the fund world. So if Norway is starting to pull completely out of sin stock, there is a great chance that the rest of Europe will follow soon (and the rest of the developed world after that).


And of course, on top of losing investment and resources, Fine Winecould also be impacted by being publicly associated with sin stocks. What can we do to prevent that?


There are a number of different ways of incorporating ESG considerations into the investment process. The popular methods are:

  1. Exclusion: If one doesn’t believe in tobacco, controversial weapons or gambling industry, just simply exclude them completely. This is similar to the Norwegian fund’s strategy, clear cut.
  2. Best in class: You could still be willing to include alcohol companies in your portfolio but you add the ones with the higher ESG score than the peer group, hence the name “best in class”.
  3. Integration: This is the most sophisticated way, where you really take ESG into consideration every step of the investment decision process.  This is more difficult, because every element of the financial models needs to take ESG measures into account. You could argue this is very subjective, because individual analysts would have different assumptions and views. In other words, how much ESG is ESG enough? Everyone has his or her own interpretation of ESG.  A lack of data and a set of global standards further fuel the complication. As a result, the easy solution is “exclusion”.


So data is key. As an industry we have to define what separates us from the rest of alcoholic drinks and we have to make sure that what we do in terms of Environmental, Social and Governance practices are known to the investment community. But what kind of data would we need?


At the moment, the ESG criteria is not yet standardised and it is difficult to standardise. There are UN guidance and individual country frameworks written into regulations touching on this subject, but not in detail. As a result, various rating agencies have their own interpretation of the framework and their own area of expertise.

An interesting finding is that the correlation between ESG scores by different rating agencies are very low, if not negative; meaning one company may be granted a high ESG score by one agency, but rated low by another.

One of my suggestions to the wine industry would be why not be proactive and drive the standardisation in defining ESG scores, rather than leaving it completed to people from the financial industry? The Fine Wine community has done a tremendous amount of work in terms of organic and biodynamic farming for years, so it understands sustainability within the vineyard and winemaking process better than anyone else in other industries.  Furthermore, the Fine Wine community needs to engage more with other industries, to help spread the message and increase transparency.

[1] Norway’s biggest pension fund cracks down on “sin stocks”, Madison Darbyshire, Financial Times, May 2019


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