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There is already clear evidence that
tobacco is bad for your health. Now, an economic analysis prepared
by the CMA indicates that investment in tobacco stocks may not do
your financial health much good either.
The study, released in June during the
Fourth National Conference on Tobacco or Health, challenges the
Canada Pension Plan Investment Board (CPPIB) over its
tobacco-investing strategy.
The board, which in 2005 has $100
million of its $81.3-billion holdings invested in tobacco companies,
has steadfastly refused to rid itself of these stocks. “There are
two competing public goods,” it stated in response to concerns
raised during the CMA’s 2004 annual meeting. “One is health policy,
and we understand the concerns many Canadians have about tobacco.
The other public good is sustaining the future pensions of 16
million Canadians.”
It adds that its investment mandate
“explicitly prohibits us from taking non-investment factors into
account.”
The CMA says this logic is faulty:
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Because the CPPIB spends just 10
cents of every $100 invested on tobacco stocks, the added risk
created by eliminating the investments would be minimal.
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MD Management, the CMA investment
subsidiary that has $22 billion under management, holds no
tobacco investments. In its April/May 2005 issue, MoneySense
magazine ranked MD’s funds in a tie for fourth place among 139
Canadian fund families.
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Tobacco stocks have performed well
recently, but face an uncertain future because of legal
challenges, particularly huge class-action lawsuits. In April,
BusinessWeek reported that “despite the [tobacco]
sector’s high momentum, S&P warns that cigarette makers still
face many legal challenges that could singe shares.”
However, balance sheets have nothing to
do with CMA President Dr. Albert Schumacher’s opposition to CPPIB
policy. His patients do.
“This is just another step on the road
toward the denormalization of tobacco,” says Dr. Schumacher, who
compares the CMA’s tobacco divestment proposal to earlier attempts
to eliminate tobacco sales in pharmacies. “In Ontario we had to
fight Shoppers [Drug Mart] very hard, but we did it because it was
the right thing to do. This is in the same category.”
The CMA study concluded that the gross
cost of tobacco use in Canada, which it pegs at $18 billion annually
due to health care costs, absenteeism and other factors, raises an
additional issue. “It is counterproductive for Canadian governments
to spend $131 million a year trying to stop people from smoking
while at the same time providing the same industry — one that
creates $18 billion in gross costs every year — with $100 million in
capital.” |
