UPDATE, 12/19: Success! On a motion by State Controller Betty Yee with a second by Priya Mathur, the CalPERS Investment Committee voted 9–3 to expand divestment from tobacco. CalPERS will continue the current tobacco divestment, and it has directed staff to expand the divestment to externally managed funds and to the Affiliate Fund portfolios. The CalPERS press release states that staff will study the appropriate timing for the implementation of the new divestment actions.
The Board reached its decision after wading through a hefty meeting packet that explored three options: “1. Remove all of the tobacco investment restrictions; or 2. Broaden the restrictions through one or both of the following: a. Extending the divestment requirement to the externally managed portfolios of publicly traded assets for the Public Employees’ Retirement Fund (PERF); and/or b. Extending all the restrictions to the externally managed Affiliate Fund portfolios currently invested in institutional commingled index funds; or 3. Affirm the existing hybrid approach in which internally managed portfolios remain divested, external managers for the PERF continue to have discretion to include tobacco-related securities as “out of benchmark” investments, and the Affiliate Fund portfolios continue to invest in institutional commingled index funds.”
The decision to expand tobacco divestment was examined from a number of perspectives. Testimony was heard about smoking and health, as well as about the financial risk of staying invested in tobacco stocks when smoking continues to decline worldwide, and when new tobacco taxes and regulations continue to accumulate.
The CalPERS Board is to be commended for this decision, which reflects a deeper understanding of their fiduciary duty and supports the judicious use of divestment to align CalPERS’ investment beliefs with the greater good of their members.