CalPERS said Monday it would consider reinvesting in the tobacco industry, setting in motion a process that could take up to 24 months before any deals are made.
After months of discussion, and a study by a consulting firm showing that the California Public Employees’ Retirement System forfeited an estimated $3 billion in investment profits by shedding its tobacco investments in 2001, the board’s investment committee voted to set up a procedure that could culminate in the pension fund getting back into the tobacco business.
The plan calls for “thorough review, study and stakeholder input” before making any decisions on whether to reinvest in tobacco.
The CalPERS plan has already come under fire from those who say tobacco investments would violate CalPERS’ principles of socially responsible investing, as well as its role as the provider of health insurance to its 1.6 million members. But senior CalPERS officials say they have a responsibility to study the impact of its divestment from tobacco and other controversial holdings.
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“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’ vice president and chairman of its investment committee. “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.”
Former State Treasurer and CalPERS board member Phil Angelides had criticized the pension fund for reconsidering tobacco stocks. “A decision by CalPERs to reinvest in tobacco would make a mockery of all that we tell our children about the dangers of tobacco products,” he wrote in an article for the Huffington Post. “As importantly, for CalPERS, it would represent poor investment policy.”