PENSION FUNDS: CalPERS, CalSTRS Consider Dumping Tobacco Stocks
The California Public Employees Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS) are each reviewing their separate tobacco holdings, the Los Angeles Times reports. The pension systems' moves come after Assemblyman Wally Knox (D-Los Angeles) introduced legislation that would require CalPERS and CalSTRS to divest their funds of tobacco holdings and would bar them from future investments in tobacco companies. At the same time, state Treasurer Phil Angelides, who sits on both pensions' boards, has called for the systems to dump their tobacco stock because "it is simply bad business" with the recent wave of litigation and poor stock performance. CalPERS has an estimated $589 million in tobacco holdings, while CalSTRS holds about $319 million.
What to Do?
Committee staffers had recommended that the panel oppose the legislation "on grounds that it 'would strip the board of its policy-setting and decision-making authority with regard to investments in tobacco companies.'" But San Francisco Mayor Willie Brown (D), who sits on the CalPERS investment committee, suggested that CalPERS ask the state Legislature to have a chance to deal with the issue before pushing legislation through. The investment committee declined to take position on the proposed legislation, but agreed to support an amendment that would indemnify board members and other employees from claims, damages, suits, losses and liabilities that could result if the legislation were enacted. The move "signals a change in approach," as the panel has opposed previous legislative attempts to force it to sell tobacco holdings. The investment committee will return within 60 days with a decision after studying portfolio and fiduciary issues related to divestment. Meanwhile, CalSTRS' investment committee had directed its chief investment officers to prepare a draft divestment policy. That committee will vote on the policy in May and then determine whether to use the policy to remove the tobacco stocks (Tamaki, 4/18).