Smoking is controversial, eliciting strong views from many people. Investment in the tobacco industry can be equally controversial for some. The question is whether the “ethical” approach to investing in the sector is really ethical at all, or simply an expression of prejudice against smokers and the smell of tobacco smoke.
In April 2016 it was announced that the California Public Employees Retirement System, or CalPERS, was reviewing the policy it had adopted in 2000 to divest from the tobacco industry. On its own estimates the policy had cost the fund some $3bn in gains foregone, a real cost to pensioners past, present and future of the fund. There was also a suggestion of other insurance companies following a similar strategy, albeit only for a limited proportion of the funds that they control.
I decided that it was time to address some of the main arguments put in favour of “dis-investment” from the tobacco sector, and in September 2016 Cenkos published “On Ethics”.
The note was submitted as a public document to the CalPERS review but in the end that review (in December 2016) barely lived up to its billing. Rather than considering the “ethical” arguments with respect to the sector which had led to the original decision to divest, it was actually a rather shallow assessment of the tobacco sector’s outlook at the time. The only “expert” called to the debate was Stanton Glantz which should tell people who know about his history much. The only person to emerge with any credit was J.J. Jelenic, a CalPERS board member, who quite rightly said that he was “not aware of anyone who smokes or doesn’t smoke based on whether CalPERS invests or doesn’t invest, and if we’re not changing behaviour, then what are we getting for the money we’re giving up?”.