Institutional investors eye gun control
Until now, gun control in the US has only been a concern from an IR perspective in terms of faith-based investors, but the high-profile public debate since the Parkland school shooting in Florida may be changing that.
Several large financial institutions have in recent weeks broken with precedent and publicly committed to engagement with portfolio companies around gun control, signaling that this may join human rights and political lobbying as a prominent social issue for investors.
BlackRock released a statement after the shooting at Marjory Stoneman Douglas high school saying that it would offer its clients a choice of products that exclude gun retailers or manufacturers. Consistent with BlackRock CEO Larry Fink’s outline of the firm’s engagement on ESG issues earlier this year, the asset manager has already contacted all major public gun manufacturers and retailers to discuss ‘responsible policies and practices.’
State Street and Bank of America have also begun engaging with US gun retailers and manufacturers, according to Reuters. ‘We are joining other companies in our industry to examine what we can do to help end the tragedy of mass shootings,’ Bank of America told Reuters in a statement.
Asked for comment, a State Street spokesperson referred IR Magazine to a comment from the firm in the Reuters article: ‘We will be engaging with weapons manufacturers and distributors to seek greater transparency from them on the ways they will support the safe and responsible use of their products.’
Heidi Walsh, executive director of the Sustainable Investments Institute (Si2), tells IR Magazine that investors have historically not seen gun control as a material issue. ‘When it comes to a social issue like guns or human rights, it’s sometimes harder to put a numeric value on the impact it could have on the bottom line,’ she says.
The fact that large asset managers are engaging on this issue is of significance, she adds: ‘If you’re a big investor and you ask something of a company and the company doesn’t respond, that looks bad and affects investor confidence.’
In a recent blog post on this topic, Courteney Keatinge, director of ESG research at Glass Lewis, writes: ‘With managers getting more active in voting and the events in Florida still top of mind, investors may want to keep a close eye on companies engaged in the manufacture and distribution of firearms this proxy season, as market or investor pressure could force changes in how these companies do business.’
There have been 10 shareholder proposals about gun control or responsible gun ownership since 2010, with four of them being filed in 2018 so far, according to the Proxy Preview from As You Sow, Si2 and Proxy Impact. The proposals were all filed before the Florida shooting.
In previous years, gun-related shareholder proposals have almost always been led by faith-based investor groups and have had limited support or not made it onto the ballot. But this year that has changed.
Two of this year’s resolutions target gun manufacturers American Outdoor Brands (Smith & Wesson) and Sturm Ruger & Co, while the other two target Dick’s Sporting Goods and Chubb. The latter two companies have since changed their policies: Dick’s Sporting Goods announced that it would no longer sell assault-style weapons. Mercy Investment Services had filed the shareholder proposal with Dick’s Sporting Goods.
Chubb’s shareholder resolution was filed by an individual investor – Stewart Taggart – who requested that the insurer end its NRA Carry Guard insurance plan, which offers coverage to individuals who use their weapons in self-defense. Chubb used the SEC’s recent guidance on the ‘ordinary business’ exception rule to throw out the proposal, stating in January 2018 that NRA Carry Guard had not been raised by investors during engagements throughout the previous year and that the resolution aimed to ‘micromanage’ the company. But after the Parkland shooting, Chubb announced that it would end its NRA Carry Guard insurance policy.
‘Investors may not always be talking about reputational risk issues in their engagements with companies, but if boards are not taking a 360-degree look at risks like this, they may get caught short,’ Walsh tells IR Magazine. ‘It’s hard not to conclude in this case that the company decided it was more trouble than it’s worth to have an association with this controversial product.’
Chubb officials declined to comment for this article.
Corporate relationships with the NRA
As is the case after all mass shootings that receive mainstream coverage in the US, the National Rifle Association (NRA) has been central to the debate around gun control since the Parkland shooting.
What makes this event different is that a variety of public companies have announced plans to end their corporate relationships with the NRA. These include Symantec, Delta Airlines, MetLife, Hertz and United Airlines. All of these companies, apart from Symantec, experienced an increase in share price the day after their announcements to end discounts for NRA members. All of the companies either declined to comment or did not respond to requests for comment.
Several other companies – including FedEx, Apple and Amazon – have faced social media campaigns encouraging consumer boycotts until the companies end their relationships with the NRA.
The NRA did not respond to a request for comment.
Davia Temin, founder and CEO of crisis, reputation and risk management firm Temin & Co, says gun control and the anti-sexual assault #MeToo movement has shown the power of consumers harnessing social media to create a targeted movement on ESG issues.
‘All of a sudden on both issues we’ve reached a tipping point on sentiment, with what’s happened on social media showing that the public’s mood is changing,’ Temin tells IR Magazine. ‘So the real exposure here is for boards to understand the values of their customer base and their core audience, and have their own set of values to live up to. The people who think they can just rearrange the deckchairs on the Titanic are in denial as to how serious this public reevaluation of issues is.’