Investors With $4.8 Trillion Push Gun Industry for Reform

(Bloomberg) -- Investors and money managers with more than $4.8 trillion in assets are banding together for the first time to pressure gun manufacturers and sellers to make firearms “safer, more secure and easier to trace.”

The 13 members -- which include State Street Global Advisors, TIAA’s investment manager Nuveen and pension funds in California, Florida and Connecticut, where mass shootings have occurred -- is asking for changes in business practices rather than threatening divestment, the group said Wednesday in a statement.

It’s unclear how much traction the investors will gain, since they aren’t among the largest shareholders of two large publicly traded gun manufacturers, Sturm, Ruger & Co. and American Outdoor Brands Corp., formerly known as Smith & Wesson.

“We’ve tried to do it alone in the past, but you need a group,” Christopher Ailman, chief investment officer of the California State Teachers’ Retirement System, who is helping coordinate the effort, said in an interview. “You need a chorus of investors singing loud and clear to hear you.”

Collective Clout

The group is asking the civilian firearms industry to comply with five principles that include the development of technology to make firearms safer and easier to trace, according to the statement. It also calls for the adoption of “responsible” dealer standards, the establishment of complete background checks, education and training of employees at distributors, dealers and retailers and work collaboratively with the investors.

“Working together, we can build and leverage solid relationships as we make progress toward mitigating risks, not only to the civilian firearms industry, but also on behalf of our investments,” Ailman said in the statement.

The initial alliance of five investors came together earlier this year and expanded to include pension funds from across the country; retirement systems representing the Methodist and Roman Catholic churches; and the California Public Employees’ Retirement System, known as Calpers, the largest U.S. pension fund.

Like Calpers, Calstrs has policies to push for change in an industry before selling assets. What’s different now, the group said, is that they believe they have a collective sway among portfolio companies they own.

Ailman said in the interview he contacted the top shareholders of gun makers, most of whom haven’t joined the coalition. The group is reaching out to other institutional investors and companies involved in all aspects of the firearms industry including sales, manufacturing, distribution and financing.

California Treasurer John Chiang, a board member of Calpers and Calstrs, said investors should use every tool at their disposal, including divestment.

“Engagement is an important and crucial first step, but these conversations must result in real action, otherwise divestment and other actionable options must be kept on the table,” Chiang said in an emailed statement. “We can end the vicious cycle of mass shootings in our schools, businesses, and places of worship if businesses and citizens stand up, together, and take concrete actions like this.”

Long Trail

Because some of the mass shootings have taken place at schools, they’ve had an impact on teachers whose pensions are invested, Ailman said.

He traced Calstrs’ concern about the gun industry to the December 2012 Sandy Hook Elementary School shooting. More recently, mass shootings have taken place in Las Vegas, where victims included California teachers; a high school in Parkland, Florida; a Pittsburgh synagogue and a bar in Thousand Oaks, California.

After Parkland, American Outdoor was questioned by its largest shareholder, asset manager BlackRock Inc., which held 11 percent at the time. The company wasn’t swayed to action, saying in a statement, “We do not believe that our stockholders associate the criminal use of a firearm with the company that manufactures it.’’ BlackRock hasn’t joined the new investor coalition. BlackRock declined to comment.

American Outdoor shares rose about 1.5 percent to $13.80 and Sturm Ruger gained 0.6 percent to $57.91 at noon in New York. The gun manufacturers didn’t reply to requests for comment.

Shareholder Proposals

The two companies this year were also the target of shareholder proposals spearheaded by activist shareholders, which included nuns, that asked for reports on gun violence and the risks of selling guns.

Both were approved, but company officials scoffed at the significance. The reports don’t compel the companies to change their product offerings.

Institutional investors have largely resisted banding together on issues. Many college endowments sold shares of U.S. companies that operated in South Africa to protest the apartheid movement in the 1970s and 1980s.

Ailman said the Calstrs board has made firearms the top priority on its list of environmental, social and governance issues.

Calstrs has engaged in various efforts for more than 25 years, and Ailman said he doesn’t expect overnight changes. “It’s darn hard and it’s slow.”

(Michael R. Bloomberg, founder of Bloomberg News parent Bloomberg LP, is a donor to groups that support gun control, including Everytown for Gun Safety.)

The list of investors seeking firearms reform and approximate assets as of Sept. 30:

State Street Global Advisors $2.81 T
Nuveen, asset manager of TIAA 988B 
California public employees  362
California teachers  229.2
Florida pension fund 202.6 
Oregon pension fund 78 
Maryland pension fund 52.3 
Connecticut pension fund 35 
San Francisco pension fund 25.3 
Wespath Inv Mgmt 23 
Maine pension fund 14.6 
Rockefeller Asset Mgmt 10.1 
Oblate Int’l Pastoral Inv Trust 0.55 

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