In the wake of the February 2018 school shooting in Parkland, Florida, some institutional investment funds are considering firearms company divestment.
Managing $70 billion in pensions for public employees, the State of Michigan Retirement System, for example, sold its holdings in ammunition manufacturer Olin Corporation on March 1, following media reports on teachers’ investments. The Florida Education Association has asked their pension administrator to consider a similar move.
The idea is taking hold in several other states, too. New Jersey lawmakers are looking at a law that would ban the state from investing any fund assets in firearms manufacturers. “With this bill, we are sending a message that New Jersey is making a conscious decision about the type of companies the state should invest in,” state senator Vin Gopal said in a statement.
Why Some Are Remaining Invested
For many state pension systems, however, the decision to begin firearms company divestment is not as cut-and-dried as it would seem. Some believe that getting rid of these stocks would conflict with fiduciary duty, as a representative of the Florida State Board of Administration told The Wall Street Journal
Others are open to divestment, but not until other options (such as shareholder engagement) have been exhausted. Connecticut Treasurer Denise Nappier issued a statement saying that she would divest the $16.5 million currently invested in gun-related equities and fixed income or end additional such investment through the Connecticut Retirement Plans and Trust Fund—but only “should the proliferation of gun violence persist and further compromise the safety of our young people, our communities, our communities, and our long-term shareholder value, following a period of stepped up shareholder activism.”
The Mutual Fund Approach
Public pension funds aren’t the only ones taking a look at their gun-related investments. BlackRock, Bank of America, and State Street have all publicly said that they’ve had discussions with gun companies about the issue in recent weeks. Jon Hale, the director of sustainable-investing research at Morningstar, wrote in a blog post that mutual funds might be better able to effect change via engagement than divestiture.
“As major shareholders, they can actively engage with the gun companies urging them to stop standing in the way of the consideration of common-sense gun regulations, to stop making certain types of guns, ammunition, and accessories, and to tighten its distribution oversight to ensure that retailers selling its products follow background checks and other applicable regulations.”
BlackRock, which has recently urged executives to engage with social concerns and social purposes, said that it spoke to manufacturers about their risk-mitigation policies, what steps they’re taking to support safe use of their products, and how they’re monitoring the sale and distribution of their products. BlackRock said that it’s using the conversations to determine whether the company is sufficiently managing the risks involved with such issues. The firm also said that those conversations and its long-term view of companies could prompt it to vote against specific directors or against management on shareholder proposals.
“For manufacturers and retailers of civilian firearms, we believe that responsible policies and practices are critical to their long-term prospect,” the company wrote in a press release. “Now more so than ever.”
As investors and asset managers start to reevaluate their holdings, time will tell whether a sea change is at hand for firearms manufacturers.