Teachers Federation Calls Out Gun Investors

Group releases list of asset managers investing in assault weapon manufacturers.

The American Federation of Teachers has released a report that creates a watch list of asset managers that invest in companies that make assault weapons.

The federation released a special edition of its “Ranking Asset Managers” report, which offers information for pension fund trustees, and calls on asset managers to evaluate risks associated with investing in gun manufacturers, and to adopt policies that lessen the safety risks of assault weapons.

“Educators have a right to assume their deferred wages are not being invested in the companies that make the military-style assault weapons used to injure and kill them and their students in countless school shootings,” said American Federation of Teachers President Randi Weingarten in a release. “This report is about exposing that risk and providing pension trustees and investment managers with the tools they need to demand meaningful action.”

The report highlights actions some pension funds have already taken to reduce their risk exposure to assault weapons makers. It also creates a list of specific steps pension funds and financial institutions can take to mitigate their risks, such as signing a gun safety code of conduct, and limiting or putting stricter stipulations on their relationships with gun manufacturers.

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The report identifies financial institutions and public pension systems that have taken steps toward engaging with weapons manufacturers, but also names financial institutions and public pensions that have not acted on the matter.

Citigroup, Bank of America, Fidelity, Vanguard, BlackRock, State Street, and Amalgamated Bank were praised for steps they have taken, such as talking to gun manufacturers about investors’ concerns, or adopting codes of conduct putting certain requirements on gun makers, as was Trillium Asset Management for not investing in gun manufacturers. 

At the same time, the report outed private equity asset managers that own gun manufacturers, including Cerberus Capital Management and Sciens Capital Management, and cited publicly traded companies that manufacture assault weapons, such as American Outdoors Brands, Vista Outdoor, and Sturm, Ruger & Co.

The federation said it has tried with no success to get Wells Fargo to meet with the group and said Invesco Advisers was the only company that didn’t respond to a request for comment on engaging manufacturers on firearm-related risks.

The report also acknowledged efforts by the state retirement systems of California and New York for pushing their pension funds to engage with or divest from gun manufacturers, while scolding Florida’s public employee retirement system for investing in all three publicly traded gunmakers.

“When companies produce products, like assault rifles, that create a national public health and safety crisis, the societal impact creates financial risk for investors,” said the report. “It is well within a public pension trustee’s scope of fiduciary responsibility to consider the legitimate risks—financial and headline—from the ownership of gun manufacturer shares and to consider whether to divest.”

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New Institute Challenges ESG-Minded Divestment Movement

Group decries push to dump fossil-fuel stocks, saying that will hurt returns.

A new pension-focused institute has been created that seeks to challenge nationwide efforts to convince public pension funds to divest from companies for environmental, social, or governance (ESG) reasons.

The Institute for Pension Fund Integrity says many of the stocks that the ESG movement shuns generate good returns, so dumping them will harm pension portfolio returns. The group said it wants to ensure that state and local leaders are held responsible for their choices in public pension investment, and “to keep plan managers from placing politics ahead of prudent investment.”

It advocates four core principles in public pension management: adherence to fiduciary responsibility; balanced economic, social, and governance factor investments; long-term pension fund return; and data-driven investment. The institute’s president is Christopher Burnham, chairman of strategic advisory services firm Cambridge Global Advisors, a former Connecticut state treasurer, and a former undersecretary general at the United Nations under President George W. Bush.  

“At a time when public pensions are dramatically underfunded, and both inside and outside stakeholders push for politically-driven divestment, something has to be done,” said Burnham in a release. “Public pension fund managers have a fiduciary responsibility to their beneficiaries to make rational decisions based on risk and return, not politics.”

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The institute said it will provide resources and commentary from thought leaders in the public investment and retirement fields, and coincided its launch with the release of a white paper titled “Fiduciary Responsibility; Getting Politics out of Pensions.”

The white paper argues that if a fund manager is investing based on “political decisions” and not purely on the risk or return, then they are weakening the fund and “undermining its integrity.” It also strongly objects to the act of divesting from companies for almost any reason that isn’t 100% financial-based.

“In order to make sound investments for maximum returns, fund managers cannot divest from huge sectors of the economy, simply because politicians urge them to,” said the white paper. “Instead, they must be guided by prudent investment strategies and enforce a diverse investment fund without the influence of politics.”

The paper cited the push for divestment from energy companies and nuclear weapons manufacturers as being counterproductive to a pension fund’s fiduciary duty.

“The numbers don’t lie: those companies have incredibly well-performing stocks and provide reliably strong returns, even during economic downturns,” said the institute, which also objects to public pension funds divesting from companies that earn revenue from fossil fuels.

“Fossil fuel companies represent some of the best-performing and most-reliable stocks available,” said the paper, adding that they are noted for having extended rates of return and reliable dividends over decades of investment. It also criticized New York City’s proposal to divest its public pension funds from fossil fuel companies, saying divestment not only will not solve New York’s pension problems, but is likely to only make them worse.

“Divestment is not a responsible investment strategy,” said the paper, “and any public pension manager that pushes for that is not executing their fiduciary responsibility appropriately.”

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