As we try to process the latest mass shooting in our country, with 17 high school students gunned down while attending school, many of us are asking what we can do to take action. I have found myself frustrated with the options available to me. I do the things that I do every time; posting articles to Facebook, calling my elected officials, and supporting new candidates for office that will put forth legislation that could help prevent these atrocities from occurring again in the future. I still feel as though it is not enough.
There is another action that can be taken. Around the world there is a movement to divest from fossil fuels. As a consultant to these campaigns, I am able to advise them on the benefits of this approach from both a social and a financial perspective, and I believe that the same arguments can apply to gun and firearms companies.
If you are currently investing in mutual funds in your retirement and investment accounts then it is likely you are investing in gun companies. American Outdoor, Sturm Ruger, and Vista Outdoor, all firearm companies, appear in a number of commonly used mutual funds. Other companies like Walmart, the largest seller of guns and ammunition in this county, are also included. The performance of your portfolio is at least partially due to the performance of these companies.
By divesting from these companies, or selling them, you are aligning your investments with your values. You will no longer be profiting from the sale of guns and ammunition in your portfolio. One way that this can be accomplished is to invest in a portfolio that screens companies for their Environmental, Social and Governance (ESG) performance. This type of screening will eliminate firearm companies from your portfolio. There are certain mutual fund companies that offer portfolios that are screened for ESG.
The implications of divestment are being debated in this country. While selling your shares of these companies will not have a huge impact on their bottom line, it does send a message, and when a large number of individuals join together and sell their shares it can drive the stock price down.
One of the arguments against divestment is that by no longer being a shareholder, you lose your vote on board resolutions and can no longer influence or change that company’s policies. While that argument is valid in some cases, it is not when it comes to gun and ammunition companies. No amount of voting is going to change the fact that they are in the business of firearms.
In addition to making a social case for divesting from firearms companies, there is also a financial case. According to a recent report from Bloomberg, gun sales are down and the largest gun manufacturers are not performing well in the stock market. Since the 2016 election, American Outdoor is down by 62%, Vista Outdoor Inc. is down by 50%, and Sturm Ruger is down 23%. This is during a time when the stock market was reaching all-time highs.
There is also evidence that reinvesting your assets into an ESG portfolio will have a positive impact on your portfolio’s performance. The Morgan Stanley Institute for Sustainable Investing reviewed performance data from 2008 to 2014 for 10,228 open-end mutual funds. They found that sustainable funds tend to exhibit higher returns and lower volatility than traditional funds. Deutsche Bank conducted a survey of 2,200 sustainable investing studies and found positive correlations between strong ESG practices and corporate financial performance for companies in every region of the world. Your portfolio can perform well while investing in companies that are doing good.
This culture of gun violence in this country cannot continue. There are action steps that can be taken. Call your elected official. Support a new candidate for elected office. Protest against this senseless violence. And divest from the companies that are trying to profit from it.
Katelyn M. Kriesel
Financial Advisor