CalPERS Staff Recommends Lifting Tobacco Ban

It’s been 16 years since CalPERS went cold turkey on tobacco-related assets.

But quitting tobacco is hard, even for an institution. When CalPERS looks at tobacco now, it sees dollar signs.

An eight-month study conducted by a CalPERS consultant concluded that the pension fund has lost out on significant returns because of the ban, and now pension fund staff have recommended the System re-invest in tobacco assets.

The board will likely vote on the matter at the next meeting on Monday.

But not everyone is on board with the plan, including at least one key trustee.

More details from the Sacramento Bee:

Wilshire Associates, one of CalPERS’ leading investment consultants, said in a report last spring that the decision has cost the pension fund about $3 billion. Seriously underfunded and struggling with declining investment profits, CalPERS has to jump back into tobacco to help improve its finances, the staff said.

The possibility of reinvesting in tobacco sparked immediate controversy Tuesday. State Treasurer John Chiang, a member of the 13-person CalPERS board, announced he will vote against the idea. “CalPERS should not put money into an industry that is so harmful to people’s health and so costly to the state,” he wrote in a letter to Henry Jones, chairman of the fund’s investment committee. Lt. Gov. Gavin Newsom, who isn’t on the CalPERS board, issued a statement that “we cannot sell our soul for profit.”

Chiang wants CalPERS to go even further with its tobacco ban and divest from all outside managers which hold tobacco assets.

 Photo by Fried Dough via Flickr CC License

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