Corporate America and Wall Street have spent the last two weeks coming to terms with a reality they have long sought to avoid: that business and investment decisions about guns affect society. This has led Americans to search for ways to get guns out of their savings plans.
Fortunately, because the sustainable and responsible investing community has understood for decades the impact of investing in firearms, we have choices. Many have already sought out those choices. As the US SIF-Forum for Sustainable and Responsible Investment has documented, just prior to the Newtown school shootings, managers of some $74 billion in investor assets would not invest in weapons-related companies, including the clients of my firm, Trillium Asset Management. By 2016, that number had grown to $845 billion. As a result, if Americans want to go “gun-free,” they can find mutual funds to invest in. And they can make their retirement plan administrators aware of these options as well.
There are many moral and financial reasons people may want to screen out firearms companies from their investment portfolios. Many people simply do not want to profit from a product that, when functioning as intended, kills people.
For others, firearms companies present a poor financial choice. These companies are under the constant risk of regulation and political pressure. In addition, the National Rifle Association exerts its own control over both the regulators and the companies. These pressures make it difficult for CEOs to engage in long-term planning for their business’s success.
For someone thinking about retirement or college savings, it’s not hard to see why they would want to divest from guns. But Wall Street often offers an excuse: We cannot divest because these gun companies are in the “index.” The index, it is explained, is a neutral algorithm, free from human whims and flaws. It represents the victory of efficiency and the wisdom of the market. So although the three publicly traded stocks of gunmakers are too small to really affect the performance of an index such as the Standard & Poor’s 1000, they still sit in investment portfolios of Americans who don’t want to invest in guns. Why? Because “the index” says they can’t be removed.
This is fiction. Humans write that algorithm. If people don’t want a company in their index, they can keep it out. In fact, just last year, S&P and FTSE Russell kept Snap Inc. out of many of their indexes after large investors objected to Snap’s decision to issue shares without voting rights.
Read more at the San Francisco Chronicle