The $290 billion California Public Employees’ Retirement System, or Calpers, may reinvest in tobacco stocks after a report found that exiting the sector cost it $3 billion in potential investment gains over 15 years. There’s more to the idea than higher returns, though. Engaging financially with controversial companies can be a better way to effect change.
Getting rid of any stake in the tobacco industry looked like the right thing to do back in 2001. It also seemed a smart investment move: The share prices of cigarette manufacturers were listless, and the sector’s prospects looked grim. A wave of health-related litigation was cresting, and it would ultimately cost the industry billions of dollars.
Tobacco groups have been adept at managing decline, however. Aggressive cost-cutting, overseas growth and higher prices have helped the likes of Altria and Reynolds American increase their stock prices some 400 percent – including reinvested dividends – since Calpers kicked the habit, according to Thomson Reuters data. The Standard & Poor’s 500-stock index returned just 60 percent over the same period. Read More>
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