CalPERS' investment staff is recommending that investment restrictions on tobacco-related securities be removed, according to a memo to be presented at the investment committee meeting on Dec. 19.
The memo said staff made the recommendation based on: “CalPERS' past experience with divestment in terms of its impact on investment performance; CalPERS' current circumstances as a mature, cash-flow negative pension plan with increasing demands on investment returns to fund benefits; and the inherent difficulty in reconciling divestment — as a form of active investment decision-making that is both static and highly public — with our investment beliefs, our portfolio priorities, or our duties as fiduciaries.”
The investment committee will vote on the recommendation at the Dec. 19 meeting.
The potential reinvestment plan follows a report by CalPERS' general consultant, Wilshire Associates, which said excluding tobacco stocks has cost the retirement system more than $3 billion in combined investment gains between 2001, when the stocks were first removed from the portfolio, and June 30.
Anti-smoking advocates have slammed $303.6 billion California Public Employees’ Retirement System, Sacramento, for considering the move, noting that CalPERS also provide health benefits for the more than 1 million people covered under the plans.
State Treasurer John Chiang, who sits on the CalPERS board, meanwhile, has come out in opposition to the plan to reinvest in tobacco stocks.
“I continue to believe that investing in tobacco-related securities is a bad economic decision for CalPERS beneficiaries, for the state in general and for the world as a whole, whether we invest directly or through others,” Mr. Chiang wrote in a letter sent to Henry Jones, chairman of the investment committee.
Mr. Chiang also said in the letter that CalPERS never fully divested of tobacco investments and called for the retirement system to do so.
“It is time to end the charade that somehow CalPERS stopped investing in tobacco companies more than a decade ago,” he said. “Our external managers currently have plowed a sizable $547 million in tobacco-related funds, according to the latest CalPERS staff estimates. We need to pull those funds and soon.”