“So – oh, one other thing that came up [at a recent legislative session], it was a very, very high visibility issue, obviously was the tragedy at Parkland school.”
Thus began the discussion at the June board meeting of the Florida State Board of Administration by the $204bn (€176bn) fund’s CIO and executive director, Ash Williams, according to the transcript of the meeting.
Williams reported that there was some discussion about what the right legislative response should be to that situation. He noted that a divestiture initiative had been brought up in the session but was not pursued. Instead, he said, a “number of public safety policy solutions embraced by the legislature and put forward by the governor that in our view are the appropriate way to respond to something like this”. The shooting was not an investment policy issue, but rather a public safety issue, Williams said.
However, he did say that the fund would be “looking at responsible and prudent ways that we can engage with companies in which we own shares that may be firearms or ammunition producers”.
He referenced SBA’s long history of constructive engagement and said that he had already been in touch with other public pension fund peers and other large, private sector asset managers. He also noted that Mike McCauley, the head of SBA’s corporate governance program, was now the chairman of the International Corporate Governance Network (ICGN) and that he had been elected chairman of the Council of Institutional Investors (CII), putting the fund in a strong position to engage rather than “doing things just to do them”.
I sent a series of questions to John Kuczwanski, the fund’s manager of external affairs. What, if any, engagement has been undertaken with either gun manufacturers or retailers, or both, since the meeting, or what plans for engagement have been made?
“The SBA engages pro-actively, as appropriate,” he replied, “with investee companies on risks to long-term performance in order to advance beneficiary or client interests.
“Every year, SBA staff conduct engagements with close to 100 companies owned within Florida Retirement System (FRS) portfolios, maintaining a dialogue and analysis of corporate governance issues and other reforms.”
He referred to the May annual meeting of Sturm, Ruger & Co, where SBA staff “voted to support an investor proposal requesting the company issue a report on the firm’s activities related to gun safety measures and the mitigation of harm associated with gun products”.Has the fund worked with any other private or public investors or investor organisations in an engagement effort? “The SBA routinely engages portfolio companies on a variety of issues and often collaborates with other pension or investor funds, including external investment managers, when possible,” he said.
At the time of the Parkland shootings, my piece on fiduciary duty and guns quoted an SBA spokesperson who had said: “the SBA must act solely in the interest of the participants and beneficiaries,” and that “as primarily passive investors, we essentially own the entire market.” But, like IPERS, one of the other funds I quoted on the issue, SBA has restrictions on investing in companies that do business with Iran and Sudan, and businesses that boycott Israel.
How does that square with the “owning the entire market” statement and with the – we should engage not divest – position on gun manufacturers?
“The Legislature has the authority to pass laws directing the SBA to require engagement, restrict future investments or total divestment of particular holdings/market sectors/environmental social governance (ESG) issues,” he replied.
“For example, we are required by law (Iran/Sudan/anti-BDS) to engage companies prior to any divestment/investment prohibitions are implemented. The end result of divestiture, however, is giving up the ability to engage.”
The SBA has posted an academic review of the divestiture vs. engagement topic on its website .
I said I understood that because the Parkland shooting took place in Florida and that some of those killed and injured were beneficiaries of the fund, this must be a sensitive issue, but a recent CalPERS board meeting that dealt with the same debate had a string of public, fund beneficiary petitioners begging the board to make a divestment decision – largely organised by John Chiang, the state treasurer.
What representations has the fund received from beneficiaries regarding the divestment/engagement debate? “None.”
And, indeed, despite calls from the president of the Florida Education Association to divest, and media reports, I could not find any evidence of Florida teachers calling on their pension fund to sell firearms stock.