While Americans are clearly fed up with gun violence and a political solution remains out of reach, there exists a potentially important avenue for progress that is within reach – finance. The retirement assets of millions of Americans continue to be invested in gun companies, largely through passive pension funds and mutual funds that track benchmarks. However, new research has found that removing gun and ammunition manufacturers from commonly tracked benchmarks maintained by S&P, MSCI, and Russell would have a negligible impact on investors’ financial performance but a large impact on the manufacturers’ share price, cost of capital, and potentially even participation in these markets.
Every single day stock index providers use their discretion to decide what companies qualify for their indices. Elizabeth Levy, a portfolio manager at Trillium Asset Management, notes that “a large number of Americans who are uncomfortable with the current state of gun regulations have exposure to the stock market through investments that are controlled by retirement plan or fund professionals who abdicate responsibility to index providers, who in turn have previously made judgement calls about stock inclusion in indexes. And yet these index providers continue to treat gun and ammunition manufacturers the same as grocery stores or software firms: acceptable investments for American households.”
Earlier this year, a global group of institutional investors asked index providers to remove controversial weapons manufacturers from mainstream global indexes. In response to that request, the indexers demurred, pointing out that investors who want to avoid these weapons can choose from specialty indices that don’t include them. There is a major issue with the indexer’s protest: investors such as pension plan participants don’t have any control over whether gun and ammunition manufacturers, benefiting from and perpetuating a lax regulatory context that a majority of Americans are deeply uncomfortable with, are included in the basket of stocks that constitute their life savings. Arleta Majoch of Impact-Cubed points out that “It is the indexers that are making a choice, and they need to be held accountable for that choice. We believe it is time for the indexers to acknowledge the choices and responsibilities they have, and to take action.” Pension plan participants, including teachers and other municipal workers living in the post-mass shooting environments of Newtown, Parkland, San Bernardino, and Santa Clarita should not have to fear that their retirement investments are profiting from, and propping up, the manufacturers of the weapons that were used to murder their children, students, colleagues, friends, and neighbors.
“We shouldn’t be forced to invest in gun companies,” said Elizabeth Levy, Portfolio Manager, Trillium Asset Management. “The evidence shows that Americans can align their retirement savings with their views on firearms, and do so without harming their savings. It’s a simple and powerful solution.”
More information on this work can be found <here>
For immediate release: December 9, 2019
Contact: Elizabeth Levy, Partner and Portfolio Manager, Trillium Asset Management, firstname.lastname@example.org, 617-532-6660
Arleta Majoch, Product Specialist, Impact-Cubed, email@example.com
Boston, MA and Jersey, U.K., December 9, 2019
Founded in 1982, Trillium Asset Management has been exclusively dedicated to sustainable, responsible, and impact (SRI) investing. They manage equity and fixed income investments for high net worth individuals, foundations, endowments, religious institutions, and other non-profits. Trillium strives to deliver market-competitive investment solutions that align with the values and wealth objectives of their clients. Trillium’s investment approach goes well beyond traditional exclusionary screening to focus instead on the positive integration of quantitative and qualitative environmental, social, and governance (ESG) data alongside financial analysis to help identify companies best positioned for risk-adjusted, long-term out-performance relative to their peers. Trillium also considers it part of their mission and fiduciary duty to engage with the companies held to press for positive change on ESG concerns or opportunities they believe will help protect or enhance shareholder value and/or create meaningful impact for stakeholders.
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Impact-Cubed uses their Portfolio Impact Footprint model to measure the sustainability of a portfolio of listed assets against a benchmark. The tool assists investors in measuring and managing the impact of any portfolio in terms of the UN sustainable development goals.
Their methodology was developed over several years in partnership with the investment community and academics to be a holistic framework for assessing sustainability and impact, based on their shared understanding of these concepts and with a firm commitment to objectivity and transparency.
Impact-Cubed is now used by institutional investors of all types and sizes to report on portfolios, to inform their product development and investment processes, and to research and compare investment products. It is their hope that this service helps investors make informed decisions about the way they allocate capital, by shedding light on the varying levels and areas of impact delivered by different investment strategies.
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