The Controversy Surrounding
Tobacco Harm Reduction

Harm reduction is a long-established public-health strategy underpinning interventions such as needle and syringe programmes, opioid substitution therapy, condom distribution, and more recently the use of GLP-1 medicines (e.g., semaglutide, tirzepatide) to reduce the cardiometabolic risks associated with obesity.

Yet despite strong evidence of effectiveness, harm-reduction policies have always been controversial. Understanding these general controversies helps explain why tobacco harm reduction provokes particularly intense debate — including within the World Health Organization (WHO).

1. Harm Reduction and the Right to Health

The preamble to the WHO Constitution states:

“The enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being…”

In HIV and drug policy, this rights-based approach is applied explicitly to harm reduction. The International Guidelines on Human Rights and Drug Policy (developed with WHO as a technical partner) state that:

“The right to health as applied to drug policy includes access, on a voluntary basis, to harm reduction services.”

This approach is recommended by UN technical agencies such as WHO, UNAIDS, and the UN Office on Drugs and Crime.

“Harm reduction measures have been recognised as essential for people who use drugs- by the General Assembly of the United Nations, the Human Rights Council, the World Health Organisation, UNAIDS, and multiple human rights Treaty Bodies and Special Rapporteurs.”

Michelle Bachelet, UN High Commissioner for Human Rights, Harm Reduction International Conference 2019 - 28th April 2019

2. General Controversies Around Harm Reduction

Despite strong support from WHO, harm-reduction policies often trigger opposition. Common sources of resistance include:

  • Moral or ideological objections: providing clean needles or condoms is sometimes seen as “enabling” undesirable behaviors
  • Fear of risk compensation: concern that people may engage in riskier behavior (“If you give out clean needles, people will inject more drugs or start injecting when they otherwise wouldn’t,” or “making condoms available will encourage earlier sexual activity among adolescents”)
  • Concerns about medicalisation or “shortcuts”: e.g., GLP-1 medicines have been criticized as a shortcut that might normalize long-term pharmaceutical use and distract from broader social and dietary determinants of health
  • Distrust of actors involved: especially where behaviors are criminalized, stigmatized, or commercial interests are involved

These general dynamics provide the backdrop for debates around tobacco harm reduction.

3. Why Tobacco Harm Reduction Is Especially Controversial

These dynamics form the backdrop against which tobacco harm reduction is debated. The WHO’s Framework Convention on Tobacco Control (FCTC), which entered into force in 2005 and has been ratified by over 180 Parties worldwide, explicitly builds harm reduction into its definition of tobacco control.

“'Tobacco control' means a range of supply, demand and harm reduction strategies that aim to improve the health of a population by eliminating or reducing their consumption of tobacco products and exposure to tobacco smoke.”

Article 1(d) of the WHO Framework Convention on Tobacco Control

However, WHO’s recent messaging is much more sceptical. A 2025 WHO position paper warns that “tobacco and nicotine companies are misappropriating the public health concept of harm reduction while mass marketing harmful products like e-cigarettes and nicotine pouches to the public at large”.

To the WHO, this is “part of a profit-driven strategy to grow and sustain tobacco company businesses by expanding their customer base or market share”.

The tobacco control movement has become highly political, and harm reduction sceptics have come to dominate the WHO’s tobacco control division. That might be rooted in a justifiable historical mistrust of the tobacco industry, but our view is that the WHO’s position has not caught up with the new reality in terms of the new products which are now available, the science backing up claims that these really are significantly less harmful, and the reality that a very large number of consumers are choosing to use THR products – over 140m now globally according to one estimate.

Unfortunately this attitude has led to many countries, particularly those in lower and middle-income regions, introducing bans for reduced harm tobacco and nicotine products. In places like India, Brazil, Vietnam and Singapore consumer are denied access to the new products at the same time as cigarettes are freely available. A May 2025 report put the number of countries where e-cigarettes are banned outright at 46.

That is likely to have significant unintended consequences, including increased cigarette use and an illicit market in e-cigarettes and other THR products so that consumers are denied appropriate regulation of the products they wish to use.

4. Global Implications

The controversy surrounding THR is not just academic; it has real-world consequences. Denying access to reduced-harm products may undermine public health efforts, increase smoking rates, and leave consumers without safe, regulated options.

An investor should consider the investment objectives, risks, and charges and expenses of the fund carefully before investing. A prospectus which contains this and other information about the fund may be obtained by calling 1-800-617-0004, or by clicking here. The prospectus should be read carefully before investing.

Investing involves risk. Principal loss is possible. The Fund is a recently organized entity, giving prospective investors a limited track record on which to base their investment decision. The Fund’s investments will be concentrated in the securities of issuers in the tobacco, or nicotine - related group of industries. The tobacco industry is subject to significant risks and uncertainties that could materially and adversely affect the financial condition and cash flows, of companies operating in it. Investing in foreign securities typically involves more risks than investing in U.S. securities, and includes risks associated with: (i) internal and external political and economic developments – e.g., the political, economic and social policies and structures of some foreign countries may be less stable and more volatile than those in the U.S. or some foreign countries may be subject to trading restrictions or economic sanctions; (ii) trading practices – e.g., government supervision and regulation of foreign securities and currency markets, trading systems and brokers may be less than in the U.S.; (iii) availability of information – e.g., foreign issuers may not be subject to the same disclosure, accounting and financial reporting standards and practices as U.S. issuers; (iv) limited markets – e.g., the securities of certain foreign issuers may be less liquid (harder to sell) and more volatile; and (v) currency exchange rate fluctuations and policies. Investment in emerging market securities involves greater risk than that associated with investment in securities of issuers in developed foreign countries.

Derivatives may pose risks in addition to and greater than those associated with investing directly in securities, currencies or other investments, including risks relating to leverage, imperfect correlations with underlying investments or the Fund’s other portfolio holdings, high price volatility, lack of availability, counterparty credit, liquidity, valuation and legal restrictions. A total return swap is a contract in which one party agrees to make periodic payments to another party based on the change in market value of the assets underlying the contract, which may include a specified security, basket of securities, or securities indices during the specified period, in return for periodic payments based on a fixed or variable interest rate or the total return from other underlying assets. The Fund is a non-diversified, investment company under the 1940 Act. Because the Fund is non-diversified, it will invest a greater percentage of its assets in the securities of a limited number of issuers. Investing in medium and small capitalization companies may involve special risks because those companies may have narrower product lines, more limited financial resources, fewer experienced managers, dependence on a few key employees, and a more limited trading market for their stocks, as compared with larger companies. The securities of micro-cap companies may be more volatile in price, have wider spreads between their bid and ask prices, and have significantly lower trading volumes than the securities of larger capitalization companies.

ETFs are subject to risks that the market price of an ETF's shares may trade at a premium or discount to its net asset value, an active secondary trading market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact an ETF's ability to sell its shares. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the ETF. Brokerage commissions will reduce returns

The Hexis Active Nicotine Engagement ETF is distributed by Quasar Distributors, LLC

Definitions used on these pages:

R&D: Research and development spend – investment in developing new products, technologies, or capabilities.

M&A: Mergers and acquisitions spend – spending on acquiring or merging with other companies to expand scale, capabilities, or market access.

Capex: Capital expenditure – investment in long-term physical or intangible assets such as facilities, equipment, or infrastructure.

Discounted Cash Flow (DCF) model – a valuation method that estimates a company’s value by discounting its expected future cash flows back to today.

Terminal value – the estimated value of a business beyond the explicit forecast period in a DCF model.

Terminal growth rate – the assumed long-term, steady growth rate used to calculate terminal value.

EV: Enterprise Value – a measure of a company’s total value, calculated as market capitalisation plus net debt

EBITDA: Earnings before interest, taxes, depreciation and amortisation