AXA SA, France’s largest insurer, said it will stop investing in tobacco and divest all of its 1.8 billion euros ($2 billion) of assets in the industry.

AXA will sell about 200 million euros of stock in tobacco companies and run off its bond holdings in the industry, valued at 1.6 billion euros, the Paris-based company said in a statement on its website Monday. AXA didn’t disclose its tobacco investments. According to data compiled by Bloomberg, its holdings include stakes in Philip Morris International Inc., British American Tobacco Plc and Altria Group Inc.

“This decision has a cost for us, but the case for divestment is clear: the human cost of tobacco is tragic; its economic cost is huge,” Deputy Chief Executive Officer Thomas Buberl, who will become CEO in September, said in the statement. “It makes no sense for us to continue our investments within the tobacco industry.”

Organizations such as the Tobacco Free Portfolios Initiative are pushing for corporate divestment in the industry. The board of the $293 billion California Public Employees’ Retirement System has asked its staff to review the pros and cons of its decision to abstain from tobacco investment. In 2010, Norway’s sovereign wealth fund, the world’s largest, excluded 17 tobacco companies, including British American Tobacco and Philip Morris, from its portfolio based on ethical guidelines.

Surging Shares

AXA owns about 0.2 percent of Philip Morris, British American Tobacco and Altria, the largest seller of tobacco in the U.S., Bloomberg data shows. An Axa spokesman declined to provide details on the shareholdings. Shares of the world’s top tobacco companies reached record highs in recent weeks as lower gasoline prices encourage some people to spend more on cigarettes.

“As an important player in health insurance and protection of people, they want to cut the link with the tobacco industry and that’s coherent,” says Benoit Valleaux, a Paris-based analyst at Natixis SA with a buy rating on Axa shares. Investments in the tobacco industry represent just 0.3 percent of AXA’s total, “and this shouldn’t create difficulties for returns,” Valleaux said.

The move is a “milestone step in the right direction” by AXA, Cary Adams, CEO of the Union for International Cancer Control, said in the statement.

AXA fell as much as 1.3 percent in Paris trading. The shares were little changed at 21.23 euros at 11:28 a.m. They’re down 16 percent this year, compared with the 14 percent decline of the 32-member Bloomberg Europe 500 Insurance index.

AXA’s asset-management operations had net inflows of about 10 billion euros in the first quarter, down from 19 billion euros a year earlier, the company said this month. The insurer sold its Elevate business in the U.K. to Standard Life Plc and is in talks to sell its SunLife unit and its traditional investment and pension business there.