(More info about vote and state treasurer comment)
By Robin Respaut
Dec 19 The California Public Employees'
Retirement System voted on Monday to broaden its restrictions on
tobacco investments, opposing a recommendation by the pension
fund's staff to reinvest in the controversial asset.
CalPERS staff had recommended that the board remove its
16-year ban on tobacco investments in light of an increasing
demand to improve investment returns and pay benefits.
But the board voted to remain divested and to expand the ban
to externally managed portfolios and affiliated funds.
The nation's largest public pension fund embarked on an
extensive review of tobacco earlier this year, after a Wilshire
Associates report estimated the exclusion of tobacco had cost
the fund about $3 billion between 2001 and 2014. That was a
considerably larger portfolio impact than CalPERS' other
divested assets, such as Iran, Sudan and certain
California State Controller Betty Yee, who voted in favor of
the ban, said on Monday that CalPERS should be mindful of the
declining tobacco sales volumes, despite the recent surge in
tobacco stocks. Yee also expressed concern about the ongoing
threat of tobacco litigation on the industry.
In the 10 years to November 2016, the MSCI World Tobacco
Index rose 12.3 percent compared with just 3.8 percent on the
MSCI World Index. The tobacco index includes Philip Morris
International Inc, Altria Group Inc, British
American Tobacco Plc, Japan Tobacco Inc and
Imperial Brands Plc.
Board member Dana Hollinger said she was "not a fan of
smoking" but did not support the tobacco ban, because "every
time we divest, we are chipping away at the diversity of the
"I see the fiduciary here as maximizing and securing
benefits to our beneficiaries," Hollinger said.
CalPERS decision to reconsider its tobacco divestment has
caught the attention of health groups, industry shareholders,
institutional investors and many of CalPERS' beneficiaries.
"It is clear that there is abundant, compelling and strong
public policy arguments to stay out of tobacco," said board
member Priya Mathur. "The tobacco industry is facing a
structural decline in terms of the volume of sales and their
ability to gain revenues for a number of reasons."
State Treasurer John Chiang announced in a statement late
Monday that the board had "not only successfully fought back
misguided efforts to lift CalPERS's 16-year-old ban," but also
now prevented outside partners from making such investments.
"Generations of Californians will reap the health, economic
and ethical benefits of today's bold decision," Chiang said.
(Reporting by Robin Respaut in San Francisco; Editing by Lisa