CalPERS Should Say No to Tobacco, Says Former Treasurer

CalPERS divested from tobacco-related assets in 2001.

But the topic re-surfaced last week, when a consultant report estimated the pension fund had missed out on $3 billion in investment gains during the 15 years CalPERS had been tobacco-free.

The report has trustees weighing whether to get back into tobacco. But Phil Angelides – former California State Treasurer and one-time Chairman of the Financial Crisis Inquiry Commission – says the pension fund should stay tobacco-free.

Angelides writes on the Huffington Post:

A 2015 report by Wilshire Associates, a consulting firm hired by CalPERS, claimed that CalPERS had foregone about $2 to $3 billion in investment earnings as a result of its decision to divest from tobacco. Yet, this analysis was deficient because it failed to examine whether and how CalPERS could have made investments with an acceptable risk return profile to replace its tobacco investments, which represented only about one-third of one percent of its investment portfolio at the time of divestment. Given the universe of investment options, there is no question that suitable investments to replace tobacco were and are available.

The same arguments raised against tobacco divestment were raised against divestment from companies doing business in South Africa during the brutal apartheid era and from companies aiding the genocide in Darfur. Make no mistake about it: the world of big finance and big business will continue to fight against divestment by institutional investors to close off any consideration of unethical or damaging corporate conduct in the making of investments, lest those considerations begin to curtail loathsome activities that produce big profits and big bonuses at the expense of the larger society.

As the nation’s largest public pension fund, CalPERS has a particular responsibility to continually strive to invest in ways that not only unequivocally meet its fiduciary obligations, but also strengthen our economy and society. That notion should hardly be considered novel. After all, as a society, we have an expectation that corporations should not only be profitable, but also should produce products of quality and conduct themselves well. Indeed, the ideal business enterprise is one that excels on both fronts. We value the real estate development firm that builds profitable, quality projects that enrich our communities. We respect the successful technology company that creates value for shareholders and innovations for the future. Why should we hold investors of capital — including CalPERS, the nation’s flagship pension fund — to a lesser standard?

Read the full piece here.