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CalPERS extends ban on tobacco to external asset managers

The Investment Committee for the California Public Employees’ Retirement System (CalPERS) has voted to broaden the tobacco investment restrictions to externally managed portfolios of public assets.

The €270 billion pension scheme also decided to remain divested from tobacco-related securities in internally managed public equity and debt portfolios.

Commenting on the decision, chair of the Investment Committee, Henry Jones, said: ‘There is no doubt that divestment as an investment strategy presents challenges.

However, after careful consideration of all the benefits and risks, the Committee has decided not only to maintain our current policy regarding tobacco divestment, but to extend the restrictions.’

The CalPERS tobacco restrictions date back to 2000, when concerns over ongoing litigation and regulatory risks facing the tobacco industry prompted it to take action.

Analysis performed in 2015 by Wilshire Associates, CalPERS board’s investment consultant, indicated that the pension fund’s restrictions on tobacco reduced portfolio returns by approximately $3 billion between 2001 and 2014. The committee decided in April 2016 to request a review of the current tobacco restrictions.

CalPERS chief investment officer, Ted Eliopoulos, said that he appreciated the committee’s willingness to review the sensitive topic of investment in tobacco. ‘We understand their concerns and will maintain the current tobacco exclusions while working to extend the tobacco divestment to our external portfolios.’

As part of the action, CalPERS staff will now study the appropriate timing and implementation.

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