California's largest public pension fund could soon end a ban on buying tobacco stocks —16 years after the California Public Employees’ Retirement System divested from them. A CalPERS committee will decide Monday whether to send the proposal to the full board.
Nearly two million state, municipal, school workers and retirees depend on CalPERS, which is facing declining returns on its investments – and has by one estimate lost three billion dollars from divesting in tobacco.
Democratic gubernatorial hopefuls Gavin Newsom and John Chiang have urged CalPERS not to give in to the temptation. But Stanford economist Frank Wolak doubts that divestment makes much difference either way.
"Even though the state of California does control a lot of money with its pensions, there’s a global market for investments all looking for the best returns possible," says Wolak.
For instance, he says to think of Saudi or Chinese sovereign-wealth funds.
"They kinda dwarf California," he says.
That hasn’t stopped legislative Democrats from passing a law last year forcing California’s public pension funds to divest from coal. Wolak says the main impact divestment does have is in just calling attention to the issue.
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