The move to review tobacco divestment by the largest U.S. pension fund has caught the attention of health groups, industry shareholders, institutional investors and many of CalPERS' beneficiaries across California.

Tobacco is the leading preventable cause of death in the United States, according to the U.S. Department of Health and Human Services.

In 2015, Wilshire Associates reported that the majority of CalPERS' divestment initiatives had reduced the pension fund's portfolio returns.

Specifically, excluding tobacco had cost an estimated $2 billion to $3 billion, Wilshire found, a considerably larger portfolio impact than CalPERS' other divested assets, such as Iran, Sudan and certain firearm-related companies.

The question to review the tobacco divestment divided CalPERS' board into two camps - those who favored a review and those who preferred to drop the discussion altogether and remain divested.

The majority favored a study that considered the broader financial and economic impact of reinvesting in tobacco.

Board members said the decision would not necessarily result in CalPERS ultimately reinvesting some of its roughly $293 billion portfolio back into tobacco. Instead, the study would be performed as part of the board's fiduciary duty.

"No one should read into this any interest in reinvesting in tobacco," CalPERS board member Bill Slaton told a board meeting.

CalPERS will take the next 12 to 24 months to examine the issue before taking any action on a possible tobacco reinvestment.