Asset manager BlackRock is adding environmental, social, and governance (ESG) investments that exclude firearms companies from their portfolios. It also said it will exclude firearms manufacturers and retailers from an existing range of six ESG equity and bond ETFs that have a total of approximately $2.2 billion in assets.
The announcement was an update on a March 2 client bulletin in which BlackRock said it would address the issue of firearms companies held in index portfolios by offering more products that exclude firearms manufacturers and retailers, and by engaging with firearms manufacturers and retailers in which its clients are invested.
“We are providing an update on certain steps we are taking – in response to client interest – to enhance our Environmental, Social and Governance (ESG) and other index product offerings to provide more choice for clients seeking to exclude firearms companies from their portfolios,” said BlackRock in a release.
Those steps include: extending its lineup of ESG ETFs with two new funds that include screens to exclude civilian firearms; offering a new line of products that are exclusively firearm-free; changing the underlying index for existing broad-market ESG equity and bond index ETFs to indexes that include screens for civilian firearms manufacturers and large retailers; and by cutting in half the net expense ratio for its flagship iShares ESG ETFs.
“The recent tragedy in Florida has driven home for BlackRock the terrible toll from gun violence in America. It has put a spotlight on the role of companies that manufacture and distribute civilian firearms,” BlackRock said in its March 2 bulletin to clients. “Many of these companies are privately owned, but some of the largest manufacturers and retailers are publicly listed companies and are therefore held in the portfolios of millions of individual and institutional investors around the world.”
Although BlackRock doesn’t publicly discuss the specifics of its discussions with individual companies, it did reveal that it is aksing manufacturers the following questions:
- What is your strategy and process for managing the reputational, financial, and litigation risk associated with manufacturing civilian firearms?
- How do you assess the financial, reputational, and litigation risk of the various aspects of your product lines and how each of those products is distributed?
- What steps do you take to support the safe and responsible use of your products?
- How do you determine where you will allow your products to be distributed?
- What strategies do you employ to monitor how your products are being sold?
- Are you investing in research and development to promote the safety of your products?
And with retailers, BlackRock posed the following questions:
- What types of firearms do you currently sell? And what share of your revenue and profit do they represent?
- What is your strategy to manage the reputational, financial and litigation risk associated with selling these products?
- What are your policies and practices for determining to whom you will sell firearms?
- What steps do you take to ensure compliance with relevant laws regarding who may or may not purchase firearms?
- What licensing do you have for your gun sales?
- What other strategies do you employ to prevent the potential misuse of firearms you sell?
- What steps do you take to support and promote gun safety education at the point of sale?
“In our engagement,” said BlackRock, “we are fundamentally looking to understand whether the company has the appropriate policies and controls in place and is sufficiently managing the risks associated with these issues.”