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CalPERS once kicked the tobacco habit. Now it’s reconsidering

Posted 2 years 361 days ago ago by Jamee V    2 Comments  0 Likes Like Dislike

Sacramento, Calif. - The ongoing battle between CalPERS investing in the Tobacco industry has come to fruition this week as CalPERS is reopening a decade-long discussion about reinvesting in Tobacco after a 16-year ban. 

CalPERS understands that tobacco, over the past 15 years, has been the 2nd highest performing industry with 900% in cumulative returns. However, we also know there are material, social and human costs associated with smoking behavior, and over 40,000 adults die each year in California from smoking. 

Positives with investing in tobacco are a consistent cash flow and durability in down markets. Negatives include falling sales, ongoing litigation, increased taxation and additive bans. 

CalPERS needs the money, but as a health insurer for more than 1.4 million public employees, retirees and their families, many are protesting this new consideration including many state officials. Wilshire Associates, one of CalPERS’ leading investment consultants, said in a report last spring the decision cost the pension fund about $3 billion. Under-funded and struggling with declining investment profits, CalPERS has to jump back into tobacco, the staff said.

In a letter sent by Treasurer John Chiang, he stated, “CalPERS should not put money into an industry that is so harmful to people’s health and so costly to the state when rising health care costs are factored into the balance sheet.” 
 
CalPERS is currently engaging with subject matter experts in asset management as well as public health communities.

At the CalPERS Stakeholders meeting on December 15 2016, CalPERS presented three options.

1. Remove all of the tobacco investment restrictions.

2. Broaden restrictions & expand to third-party managers

3. Affirm; as is/keep status quo. Staff will recommend option

CSR is closely watching this issue and will report any updates. 
 

CalPERS tobacco webinar via Youtube 

Sacbee Article

Treasurer John Chiang's letter to California Public Employees’ Retirement System (CalPERS) 
 


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2 Comments



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  • Frank Weinstein 2 years 357 days ago
    I see where CALPERS voted with their conscience. Good!

    Reply
  • Frank Weinstein 2 years 358 days ago
    This is an interesting concept. The issue, as I understand it, is that these companies have diversified. So a tobacco company may own, say (just sayin') a company that produces lung cancer drugs (no conflict of interest there, right?). I don't have a problem investing in companies that research lung cancer drugs, but not tobacco. Tobacco kills. There should be thousands of opportunities to invest in companies that don't kill people. With the legalization of marijuana, we'll probably see some of the same issues (is inhaling marijuana smoke bad for you?). If there was a way for CALPERS to invest in the lung cancer company without any of the profits going to the tobacco company, that would be okay with me. But is it possible?

    Reply
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