The CPP should Butt Out

Source from:  nationalpost.com Gordon Keast, National Post Tuesday, July 29, 2008 08/01/2008

At the same time Ottawa is trying to get Canadians to stop smoking through ads, high taxes, age restrictions and dire health warnings on every cigarette pack, the Canada Pension Plan Investment Board (CPPIB), the federal Crown corporation that manages the assets of the Canada Pension Plan, is pouring hundreds of millions of dollars into tobacco stocks. As of March 31, 2008, its tobacco holdings had a market value of more than $490-million. Virtually every salary-earner in Canada over the age of 18 must pay into the Canada Pension Plan. It's the law. And like it or not, part of your premiums have been used to buy huge stakes in some of the world's biggest tobacco companies. These holdings include $165-million stake in Philip Morris International and a $72-million investment in Altria, which controls half the U. S. cigarette market. Your CPP contributions have also been used to buy $38-million worth of British American Tobacco, the world's #2 tobacco firm (behind Altria Group) and a company that sells nearly 855 billion cigarettes in more than 190 countries annually. Other sizable holdings include Japan Tobacco ($42-million), Imperial Tobacco ($25-million),Carolina Group ($24-million), Korea Tobacco ($21-million), Reynolds American ($12-million) and Canada's largest tobacco company, Rothman's ($57-million). On a social level, it's exceedingly hard to see how these investments will benefit Canadians. Especially when you consider that Health Canada will spend $180-million on its Tobacco Control Program over the next three years. According to Health Canada's Web site: "Every 11 minutes, a Canadian dies from tobacco use. Every 10 minutes, two Canadian teenagers start smoking cigarettes; one of them will lose her life because of it. Yearly, more than a thousand Canadians who never even smoked die -- from exposure to tobacco smoke. Thousands more are diagnosed with illnesses related to tobacco use. Year in and year out, more than 37,000 Canadians perish --because of tobacco." Pretty grim stuff. But that hasn't stopped the CPP from investing in tobacco. In 2005, the Canadian Medical Association urged the CPP to jettison its tobacco holdings. It even issued a comprehensive report outlining the ethical, financial and legal reasons for divesting from tobacco stocks. At the time, CPP's tobacco holdings totalled just $100-million. Not only has the CPPIB ignored the doctor's orders, it has increased tobacco investments by over 390% in just three years. On the occasion of this year's World No Tobacco Day, Canada's Health Minister Tony Clement announced: "Today, I am pleased to acknowledge that Canada continues to be a world leader in tobacco control, and that smoking rates in Canada, including smoking rates among teenagers, are at the lowest levels ever." Good news, indeed. So why is the Crown corporation that invests CPP premiums on our behalf buying tobacco stocks? The CPP investment board has a mandate "to invest in the best interests of Canada Pension Plan contributors and beneficiaries and to maximize investment returns without undue risk of loss." But given the health care costs of smoking and the high mortality rates, the "best interests" of Canadians would seem to lie somewhere else. Equally mind-boggling is the situation in British Columbia, where I live. This year, the Supreme Court rejected an appeal by tobacco companies trying to block B. C.'s Tobacco Damages and Health Care Recovery Act. This act is similar to laws in the United States and the court decision will allow B. C. to proceed with a lawsuit seeking to recover up to $10-billion in health care costs related to smoking. Ironically, as this is unfolding, the British Columbia Investment Management Corporation (BCIMC), another Crown corporation, has invested more than $385-million in tobacco stocks on behalf of public trusts, insurance funds and pension plans that provide retirement benefits for a range of public sector employees, including MLAs. Perhaps all this doesn't bother you. After all, cigarettes are legal in Canada. And if people want to knowingly shorten their life expectancy doing something they view as pleasurable, so be it. On the other hand, investing public money in tobacco stocks is a bit like second-hand smoke, it's both annoying and a serious health hazard that racks up billions in health care costs. Maybe it's time for the Canada Pension Plan to give up smoking. Enditem