Two decades after Minnesota reached a landmark settlement with the tobacco industry and dumped much of its stock, the state has at least $297 million invested in major tobacco companies, from Philip Morris to British American Tobacco.

The investments, held through a state board responsible for managing public employees’ retirement funds, remain despite efforts by public officials to divest from tobacco on financial and moral grounds.

Some members of the State Board of Investment, which oversees the state’s $95.7 billion investment portfolio, said they were surprised to learn about the extent of state money in tobacco companies, which remain financially resilient even as their political clout has waned.

“It is concerning to me,” said Attorney General Keith Ellison, one of four board members. He said he would ask about those investments.

Alan Blum, a doctor who was at the forefront of a call to remove tobacco investments in the 1990s, described the state’s investment in tobacco as particularly hypocritical, though not uncommon.

Minnesota was among the first states to sue tobacco companies for health care costs in the 1990s. It was the first to enact a Clean Indoor Air Act in 1975. And the state was home to one of the leaders of the Great American Smokeout, an annual event to encourage smokers to quit.

“It’s contemptible for Minnesota especially,” said Blum, director of the University of Alabama’s Center for the Study of Tobacco and Society.

The push to divest followed the state’s first-in-the-nation tobacco trial in 1998, which resulted in a record $6.5 billion payout from the industry to recover the public health costs of smoking.

The settlement with the state and Blue Cross Blue Shield of Minnesota was structured to spread the payments out over 25 years, a period during which the industry faced the threat of more potentially costly settlements. Among the defendants were Philip Morris and British American Tobacco, companies in which the state currently owns shares.

Then-Minnesota Attorney General Hubert Humphrey III accused the tobacco companies of misleading the public about the dangers of smoking and suppressing research on nicotine.

Humphrey, who was running for governor at the time, announced that the tobacco industry had “surrendered on our terms.” But Big Tobacco has proved an alluring investment for other public and private investors over the years.

Philip Morris stock traded around $83.50 on Friday, a nearly 80% increase over its value 10 years ago. An investment in British American Tobacco is up about 20% over the same period.

State officials’ decision to divest from tobacco by 2001 was described at the time as fiscally prudent. They expected the companies to take a financial hit after the lawsuits and wanted to protect retirees from losing money.

“When we made the decision for tobacco, it was made on economic grounds. If you were to look back over the ensuing 21 years since that was made, we were dead wrong,” State Board of Investment Executive Director Mansco Perry said.

The biggest retirement system in the country, California’s CalPERS, removed its investments in tobacco around the same time as Minnesota. A 2016 analysis commissioned by CalPERS found the fund had made about $3.6 billion less than it would have if they retained the investments.

Minnesota’s divestment from tobacco was limited. It could have made a little more money if it did not divest, Perry said, but it did not lose out on nearly as much as other places.

Investment board officials had opted to end the stake in major tobacco product manufacturers in funds where managers are actively choosing investments or where the equities are part of semi-passive funds. But in passively managed funds, which automatically match the stocks in an index rather than having fund managers select them, making the switch would be labor-intensive and costly, Perry said.

“One way we make money is not to spend it,” he said.

The tobacco holdings are a tiny fraction of the State Board of Investment’s massive investment portfolio, according to a Star Tribune review of the most recent asset listing from December 2018. The board generates returns for various retirement funds, trust funds and state cash accounts. For Perry and members of the State Board of Investment — made up of Ellison, Gov. Tim Walz, State Auditor Julie Blaha and Secretary of State Steve Simon — state law says their primary responsibility is to retirees and public employees, meaning they need to act in the employees’ best interest financially.

“If I make a decision because I just don’t like something, well, is that a breach of my fiduciary duty or not a breach of my fiduciary duty?” Perry said. “And so that’s the fine line.”

Walz’s office said his responsibility as a fiduciary cannot be subject to his opinions. “Governor Walz relies on the experts at the State Board of Investments and Investment Advisory Council to make investing decisions in the best interest of Minnesota’s employees and retirees,” spokesman Teddy Tschann said in a statement.

Blaha praised the state’s limited divestment moves and echoed Perry’s concerns about the complexity of divesting from passively managed funds.

“I believe that the choice did make progress,” she said of the partial removal of tobacco investments. “It had an impact. I don’t think you have to have absolute [divestment] to make an impact.”

Blum sees it in more stark terms. “They’re saying, ‘We’re going to get our returns over the bodies of 480,000 Americans,’ ” Blum said, citing the Centers for Disease Control and Prevention’s calculated annual total death toll from cigarette smoking.

But Blum acknowledged that when it comes to divesting from tobacco, the impact is limited. He said someone else will just buy up the stock if the state sells its shares.

Rather than divesting, it can be more productive to concentrate on finding good investment opportunities that align with an organization’s values, said Susan Hammel, a consultant who specializes in helping organizations make socially conscious investments.

Many foundations, as well as private and public institutions, are considering environmental, social and governance criteria when investing, she said. More investment committees and fiduciaries are looking at risks associated with companies, like those in the fossil fuel industry, that don’t align with their beliefs, she said.

Simon, the secretary of state, said the investment board continues to grapple with how to balance fiduciary and ethical concerns.

“We have a fiduciary duty, but how far does that go?” Simon said. “We could all cook up hypotheticals about, even if company does X? Even if industry does Y? Even if this nation-state does Z? Really? You’re still going to maximize returns?”