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California state pension fund extends tobacco divestment

The largest state public pension fund voted this week to continue its ban on investing in tobacco companies and to sell off its last $550 million worth of tobacco-related investments.

The objective of ‘doing well’ does not require compromising ‘doing good.’

California Public Employees’ Retirement System (CalPERS), which voted to divest from tobacco companies in 2000, rejected a proposal from staff members to allow the agency to lift the ban and reinvest in tobacco companies. CalPERS’ investment committee dismissed the proposal in a 9-3 vote Monday and also extended the ban to funds handled by outside investment managers, which currently totals about $550 million that the agency will unload.

“CalPERS decision is a model for all public funds to uphold and for all other investors to consider,” said Robin Koval, CEO and President of Truth Initiative. “The objective of ‘doing well’ does not require compromising ‘doing good.’ The CalPERS board has affirmed that tobacco is a bad investment for both the well-being and the wallets of California.”

While it is estimated that investing in tobacco companies could have added about $2 billion in investment returns in the 15 years since the CalPERS ban, that is only a partial picture as tobacco use has cost the state many multiples more in that time.

In California, the healthcare costs directly caused by smoking amount to $13.29 billion annually, and Medicaid costs caused by smoking total $3.58 billion each year. Additionally, California loses $10.35 billion in productivity each year due to smoking.

This means that the state has spent an estimated $200 billion on tobacco-related healthcare and businesses have endured $155 billion in lost productivity due to smoking in the time since CalPERS banned tobacco company investments.

CalPERS is the biggest state public pension fund with more than 3,000 employers, 1.8 million members and about $290 billion in assets.