It is hard to deny the U.S. has a problem with gun violence. Columbine, Virginia Tech, Sandy Hook, San Bernardino and Orlando all no longer occupy our minds only as cities, towns, colleges or schools -- but as places where mass shootings and tragedies took place. It's reported that nearly 100,000 people every year are killed or injured by guns in the U.S., yet despite the high casualty numbers there seems to be little progress on gun control.
Investors can use their voice to help bring about positive progress.
Divestment is one option
There are a number of ways investors can drive the conversation forward. One-way investors can help to move the conversation on, is by divestment, i.e. the selling of all (or most) stocks in a portfolio from a particular industry. Examples of issues subject to divestment campaigns include apartheid in the 1980s, tobacco in the 90s and, more recently, fossil fuels.
While divestment can inflict financial damage its real power tends to be in the message it sends. For example, in 1990 when Harvard University and City University of New York (CUNY) decided to divest from tobacco, then Harvard President Derek Bok stated they did not want "to be associated as a shareholder with companies engaged in significant sales of products that create a substantial and unjustified risk of harm to other human beings." These actions and public statements highlighted the dangers of smoking and helped to empower public debate about tobacco. Soon after many rules and regulations to limit tobacco's harm became institutionalized in society. For example, the banning of smoking on all interstate buses and all domestic flights longer than six hours and the FDA's moves to regulate tobacco sales and advertising aimed at minors.
Active management and engagement
Another way investors can move the conversation forward is via engagement and active management. That is identifying risks and issues in companies and asking them to either address the issues or improve performance.
A very useful set of principles for investments in companies making or selling gun and ammunition already exists -- the Sandy Hook Principles. Created after the 2012 Sandy Hook tragedy in which 20 children and six adults were shot and killed at an Elementary in Newtown, Connecticut. They are a set of guiding principles meant to influence the behavior of gun and ammunition manufacturers and retailers by establishing baseline standards for responsible conduct. The 20 principles include:
- Supporting universal background checks for all gun and ammunition sales,
- Stop the sale of military style assault weapons to civilians,
- Partnering with local communities to provide gun safety education for children and adults.
Investors can take the Sandy Hook Principles to their relevant investee companies, and ask them to actively work towards meeting them as a condition of investment.
It is time for investors to use their voice
Unfortunately, the uptake of the Sandy Hook Principles has not been widespread and only the Philadelphia Board of Pensions and Investments have explicitly supported it in their own investment policy.
As far as I am aware, less than a dozen U.S. municipalities or state pension funds have spoken out on their stance regarding gun and ammunition investment or any divestments made including CalPERS, CalSTRS, Chicago Teachers Pension Fund, Chicago Municipal Employees Annuity and Benefit Fund Board, the City of New York, New York State Comptroller's Office and Los Angeles City Council. Divestment has included gun and ammunition manufacturers, component parts, and retailers with significant gun sales.
The City of New York recently added divestment of financial institutions "Dirty Dozen" that have direct investments in makers of assault weapons and high-ammunition clips and retailers who sold guns. As New York Mayor Bill de Blasio stated, "If we are investing in companies that put military-grade weapons on our streets, then we are part of the problem. It's time to stop business as usual and become part of the solution."
Investors used their influence to help fight apartheid and the growth of the tobacco industry; now with 19 mass shootings taking place in the US since Sandy Hook and occurring with increasing frequency, they should come together to act on gun violence as well.
It may not stop all gun violence but it may save one family or one community untold grief.
The information in this document should not be considered a recommendation to buy or sell any security.