CalPERS to Review Divestment Policy

In light of a consultant report showing CalPERS may have lost out on $2 billion in investment gains since divesting from tobacco-related assets 15 years ago, the pension fund announced on Monday it would review its divestment policy.

The review includes consideration of whether to re-invest in tobacco.

From CalPERS:

The California Public Employees’ Retirement System’s (CalPERS) Board of Administration (Board) today laid out a path to review all of the System’s existing divestment initiatives, including tobacco. Based on directions given to CalPERS staff, the Board will consider reinvestment in tobacco after thorough review, study, and stakeholder input. The process is expected to take between 12 and 24 months and will culminate with a decision in early 2018. All non-tobacco divestments will be reviewed according to a new loss threshold policy, to be developed during the same time period.

“Divestment as an investment strategy presents a challenging conflict for CalPERS, as it often pits social responsibility against our fiduciary duty as outlined in the California Constitution,” said Henry Jones, CalPERS Board Vice President and Investment Committee Chair. “As a California public agency, we are sensitive to the policy issues surrounding divestment causes. But we’re also obligated to ensure that we maximize our investment returns on behalf of our members. We now have a clear path forward.”

Today’s direction from the Board follows three months of debate and discussion about how to create a process to periodically review CalPERS’ divestments from an investment and fiduciary perspective. It also comes on the heels of an October 2015 report from the Board’s investment consultant, Wilshire, which shows that CalPERS has lost approximately $8 billion from its various divestments, as of December 31, 2014. Tobacco was responsible for approximately $3 billion in losses.

Read the full statement here.

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