Pressure mounts on CalPERS as CalSTRS pledges gun divestment

New three-point plan on banned weapons includes engagement, proxy-voting and divestment

CalSTRS will make corporate engagement on firearms “a top priority”, and has committed to divest if target companies do not comply, putting sister pension fund CalPERS under pressure to follow suit.
The $222.5bn California State Teachers’ Retirement System made history yesterday, when it became the first US state pension fund to adopt a divestment policy for the makers and retailers of military-style weapons banned in the state. The approach applies to its active and passive holdings.
As part of the three-step process, which was unanimously passed by its board at a vote this week, CalSTRS has revised its 2018 Corporate Governance Engagement Plan, pledging to “prioritise engagement with companies that manufacture and sell guns illegal in California”.
Two new staff will be appointed to support the push and update the investment committee on progress: one in a corporate governance role and the other in a communications role. Along with existing corporate governance staff, they will publicly engage target companies.
“Unlike other CalSTRS engagements, where our staff practices quiet diplomacy, this plan advances a more public approach, to leverage the public pressure that has been mounting in the country in response to recent tragic gun violence,” said Chair of the Investment Committee, Harry Keiley.
After a “limited period” of engagement with those firms, during which CalSTRS will try “to persuade them to end such sales”, the second step of the newly-adopted policy will involve using its proxy voting powers to “cast votes against retaining the company’s entire board of directors”.
If this does not prompt the desired changes, CalSTRS has committed to “consider divestment or customised indices that would exclude retailers”.
“We’re taking steps to protect the CalSTRS portfolio, avoid reputational risk and increase long-term value of the companies in which we invest, while also expressing sensitivity and empathy for the heinous gun-related tragedies that have impacted our country over the last several years,” said Keiley, adding: “We encourage other institutional investors to consider conducting similar activities”.
This is not the first move CalSTRS has made to limit its exposure to firearms. Since 2012, it has exited Sturm Ruger, Smith & Wesson, Remington Outdoors and Vista Outdoor.
The decision came as California’s State Treasurer John Chiang, State Senator Anthony Portantino and Assembly Members Eloise Gomez Reyes and Mike Gipson proposed legislation to “statutorily require the adoption of a nearly identical process for disposing of banned firearms investments made by both the California State Teachers’ Retirement System and the California Public Employees’ Retirement System (CalPERS)”.The vote at CalSTRS “has eliminated the need for the proposed legislation to govern its future investment activities”, said Chiang, who has been campaigning on the topic in recent months.
“CalPERS, however, has dragged its heels in response to the growing public calls for divestment in sellers of banned assault weapons,” he claimed, accusing the $326bn pension fund of “refusing to hear the issue” at a meeting in March.
“If Congress and statehouses are stuck on stupid while Americans are burying their children, spouses and siblings, then I call upon the nation’s largest institutional investors to end the mother’s milk of investments, financing and cash flow to the manufacturers and deals of military-grade assault weapons,” he said.
Elsewhere in the US, shareholders in Sturm Rogers yesterday voted in favour of a proposal requesting that the company reports on its efforts around promoting gun safety. A majority of investors backed the resolution, which was submitted by members of the Interfaith Center on Corporate Responsibility. ICCR described the vote as “a signal of growing unease amid calls for investors to either engage constructively with gun companies on the topic of gun violence or divest portfolios of gun stocks”. It also pointed out that investors and financiers were “all reassessing their relationships with the industry”.
Colleen Scanlon of Catholic Health Initiatives was the lead filer of the proposal, and asked Sturm Rogers’ board to describe its measures to design and manufacture safer guns and accessories, and any other safety measures it is undertaking to mitigate reputational and financial risks arising from gun violence.
“Although Sturm Ruger has in the past asserted its support of gun safety measures, we see no evidence of the company’s efforts to produce safer gun products for use by the public,” Scanlon said.
ICCR members purchased stock two years ago in Sturm Ruger, with a view to engage on the topic. They have also bought shares in American Outdoor Brands and Dick’s Sporting Goods for the same reason. ICCR described its engagement with the latter as “constructive”, highlighting the companies recent decision to stop selling assault-style weapons, increase the minimum age required to purchase a gun and begin lobbying for ‘common sense’ gun laws.
Rev. J. Michael Solberg, Senior Pastor at The Union Church of Hinsdale, and leader in Metro IAF’s Do Not Stand Idly By campaign, said that Sturm Ruger, on the other hand, need to catch up with peers and “give answers”.
“Sturm Ruger needs to take their responsibilities seriously for public safety to ensure future profitability. We encourage them to face these issues and be part of the solution,” he said.