ESTIMATE: Tobacco Ban Cost CalPERS Over $3.6 Billion in Potential Gains

UPDATE: On December 19, 2016, the CalPERS investment committee, by a 9-3 vote, approved a motion to expand the ban on investing in tobacco-related stocks to more than US$ 500 million invested in externally managed funds. In addition, the committee decided to not vote on an investment staff resolution to reinvest money into tobacco-related stocks. Therefore, CalPERS has increased its ban on investing in tobacco investments. The new measure in effect may impact active equity managers for CalPERS.

At the moment, many public pensions across the United States are underfunded. Should public pensions restrict the universe of listed equities based on social criteria, knowing that it could impact the solvency of retirement funds?

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After a thorough analysis, in a recent investment committee meeting item, investment staff at the California Public Employees’ Retirement System (CalPERS), descriptively recommended exiting out of its tobacco investment ban. A decision will be made on December 19, 2016 on whether CalPERS will drop its ban on tobacco-related securities. Delicately, CalPERS staff detailed that they recognized that the social cost of tobacco is undeniable. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]



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