The firm revealed that it will not invest in any company deriving more than 10% of its revenue from tobacco. This 10% threshold means that all tobacco manufacturers and major distributors are excluded, without hampering investments in companies from other industries that may derive a small amount of revenue from tobacco, such as supermarkets.

Scottish Widows, which manages around £190 billion of savings and investments for over six million UK customers, revealed the new strategy would apply to about half of its total investments.

The change in policy will mean the firm will divest itself from companies including British American Tobacco, Imperial Brands, Philip Morris and Japan Tobacco.

Maria Nazarova-Doyle, head of pension investments and responsible investments at Scottish Widows, said: “With responsibility for trillions of pounds worth of investments, it is imperative that the pensions industry champions a responsible approach to investing, creating strong financial returns for savers with the help of active stewardship while divesting from practices that threaten the long-term health of people and our planet.

“Taking the long view, industries such as tobacco are at severe risk of becoming stranded assets, as they face intense pressure from investors, regulators, and consumers, and  consistently fail to properly address the social impacts of their products and within their supply chain.”

She concluded: “We stand by our belief that carbon-intensive sources of energy such as thermal coal and tar sands will ultimately be replaced by greener renewable sources such as wind or solar. As such, exiting these highly damaging areas and redirecting capital to more climate-aware investments makes perfect investment sense.”